Noonan promises belt-tightening as Europe shows Budget concern
The EU has signalled that next year's budget could be too expansionary, prompting Minister for Finance Michael Noonan to promise a "tight control" on spending.
In an opinion published yesterday, the European Commission said that while the' Budget was "broadly compliant" with European Union rules, it would breach an EU spending cap by around €800m next year - or 0.4pc of GDP.
"The additional spending goes on top of the tax cuts and spending increases included in the 2015 budget," the Commission said in a staff note accompanying the decision.
"Moreover, the extra spending is primarily financed by buoyant corporate tax receipts which, by experience, are fairly volatile," the note said.
The EU wants the Government to channel any revenue windfalls into paying off its debts, particularly while the economy is booming.
Although the Commission can't change the Budget, it has asked the Government to "take the necessary measures" to make sure it abides by the EU's rules. In its opinion, the Commission also pointed to "recurring overspending especially towards year end, compared to government plans" and "volatile" growth estimates.
Finance Minister Michael Noonan welcomed the Commission's assessment and said that no changes would be made to the Budget.
However, he said Ireland would need to "maintain a tight control of expenditure" next year.
"Delivering on our fiscal commitments has been a cornerstone of Government policy over recent years," Mr Noonan said in a statement.
"I don't think the Budget's too expansionary," Minister for Defence Simon Coveney told reporters at a meeting in Brussels. "I think Irish people expect us to encourage and support and facilitate a growing economy because, ultimately, that's how Ireland will solve a lot of its problems."
The Commission's warning comes just two weeks after it predicted Ireland's economy would grow at 6pc this year, three times the EU average, and continue growing above the average in 2016.
Ireland's budget deficit is also under the EU's upper limit of 3pc of GDP and is set to stay that way next year, which should lead to less stringent budget rules - although the Government will still be obliged to stick to certain targets.
EU economics chief Pierre Moscovici told reporters that Ireland's Budget "doesn't preoccupy [the Commission] particularly", despite the concerns expressed in the opinion, which was unanimously adopted by all 28 EU commissioners.
Of more concern to the Commission are budget plans from Italy, Austria, Lithuania, France and Spain, which risk missing their budget targets and could face repercussions if they don't take action. Eurozone finance ministers will discuss the Commission's opinions at a special meeting next Monday.