Government’s €1.3bn budget package breached EU rules – but won’t draw fines

Ireland’s 2017 budget goes beyond the limit of prudent policy, the country’s fiscal watchdog said Wednesday after the government announced a €1.3bn package of spending increases and tax cuts.

The measures appear to break European Union budgetary rules, but not by a significant enough margin to justify fines, the head of Ireland’s Fiscal Advisory Council John McHale said.
Finance Minister Michael Noonan on Tuesday announced the €1.3bn package of tax cuts and spending increases, increasing an earlier estimate that the government would have 1 billion euros to spend in the budget.

That extra €300m plus an extra €300m of resources for 2016, also confirmed on Tuesday, means the government will inject €3bn of new resources into the economy in 2016-17 up from an earlier estimate of 2.4 billion, McHale said.
“We see that as beyond the limit of 2.4 billion which we saw itself as being the limit of prudent policy,” McHale told state broadcaster RTE.

The budget indicates the government will reduce its structural deficit — a measure that strips out business cycle effects and one-off revenue and spending — by 0.3pc next year rather than the 0.6pc improvement demanded by EU rules, McHale said.

He said it also exceeded EU rules on allowable expenditure growth by €200m.

“These breaches are not large enough – at least on current projections – to bring fines from the EU. But they still are breaches of the rules,” McHale said.
Noonan on Tuesday described the budget as representing “prudent fiscal policy” and said he expected the country’s budget deficit fall to 0.4pc of GDP in 2017 from a deficit of 32pc when he took office in 2010 in the middle of the country’s financial crisis.

Deputy Prime Minister Frances Fitzgerald told RTE that the department of finance did not agree with the Fiscal Advisory Council’s assessment.

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