Cowen admits Government to break EU rules on borrowing
Monday September 15 2008
THE TAOISEACH yesterday confirmed that the Government would breach EU spending guidelines this year and next -- but refused to spell out what it might mean for the Budget and take-home pay.
Mr Cowen effectively confirmed Finance Minister Brian Lenihan's suggestion that Ireland will skate past the 3pc economic limit for borrowing in 2008, and do so again in 2009.
At the weekend, it emerged that Mr Lenihan had received a form of 'preliminary permission' for deficit-funding this year, following discussions on the margins of an Ecofin meeting of EU Finance Ministers.
The Taoiseach yesterday said the Government would "deliberate upon" the ramifications of a two-year breach of Brussels' strict 3pc borrowing rule.
But he said Ireland would only consider exceeding budgetary ceilings with the sanction of the EU Commission -- and as an exceptional measure to cope with mounting economic problems.
The gathering crisis in the public finances has already seen Exchequer revenues plummet and the numbers on dole queues soar, with more of the same predicted.
Allowing Mr Lenihan to exceed strict budgetary borrowing rules would dramatically ease pressure both to cut individual Departmental budgets and to bolster State revenue streams.
Crucially, it would also avoid a worst-case scenario where the Government has to consider increased taxes to make up the exchequer shortfall.
Plummeted
Ireland's tax-take has plummeted over the past six months, given the combined impact of the global economic slowdown and the near collapse in the building industry. The EU Commission is understood to have already given Ireland approval for the budgetary move -- largely on the basis that Ireland has been one of the EU countries that has most strictly adhered to Eurozone rules.
"These are matters, at the end of the day, for the Irish Government to deliberate upon at the beginning of the budgetary process," Mr Cowen said in Cork yesterday.
Under the strict budgetary rules agreed by Eurozone countries, budgetary deficits cannot exceed 3pc of Gross Domestic Product (GDP) without EU prior approval -- and only in exceptional circumstances.
"Under the Stability and Growth Pact, rules and guidelines about the deficit requires that anything over 3pc requires discussion with the [EU] Commission about how we proceed," the Taoiseach added.
"There is [then] obviously an excessive deficit procedure that kicks into place -- but we wouldn't be unique in that in the current circumstances," he said.
But Mr Cowen refused to confirm the precise measures the Government would opt for in the budget.
"I know how anxious everyone is to know what is in it --what the final figures are -- but if people could allow us for the next few weeks to make that very serious deliberation we can bring all this to fruition and we can have a discussion about it when decisions are taken," he said.
- Ralph Riegel and Senan Molony
