EU dashes Labour's hopes for a quick end to austerity
Published 02/06/2014 | 02:30
The Government must deliver €2bn in spending cuts and tax hikes in the upcoming Budget, the European Commission has warned.
Calls by both Labour leadership contenders, Joan Burton and Alex White, for an end to austerity have been dashed by European officials who want tax increases and spending cuts to continue.
A new report from the EU Commission will today tell the Government that it must stick to its austerity programme, and in particular gain control of its runaway health budget. It must also do significantly more to tackle the country's high level of unemployment, particularly its long-term unemployment.
Ms Burton, who is seen as the front runner for the leadership, has signalled a major shift in economic policy in the wake of Labour's hammering in the local and European elections, which culminated in the resignation of Eamon Gilmore.
Commission officials are also insisting that there is no leeway in meeting the target of reducing borrowing to under 3pc of GDP next year. The report also warns that it is vital Ireland stays the course in order to retain the confidence of the international money markets.
Significant overspending in Health Minister James Reilly's department has again occurred with a reported overrun of €80m up to the end of March.
Of that, the HSE said hospitals had racked up €63m of that deficit.
The warning comes as part of new recommendations from the EU Commission on the Irish economy.
The recommendations come six months after Ireland exited the IMF/EU/ECB troika bailout and are part of the normal engagement between countries and the Commission.
This monitoring is on top of the twice-yearly visits from the troika, which are set to continue for a number of years in the wake of the bailout programme.
The Commission is calling on the Government, through tax increases and spending cuts, to reduce the gap between tax income and what the State spends to under €5bn or 3pc of GDP.
As part of new budgetary rules, Dublin will now have to negotiate with the Commission over the summer as to what cash adjustment will be needed to reach the 3pc target, and the working figure pencilled in is €2bn.
But it is the concern about the health sector that is exercising the minds of Brussels bureaucrats. The Commission wants the Government to gain control of the health budget by delivering savings in the area of pharmaceuticals.
A spokesman for the Department of Health last night said: "We are due to receive a report tomorrow. That report will have some observations around health among many other areas. We'll study the report and then be in a position to respond."