Ireland has come under renewed pressure from the EU to maintain the tight budgetary consolidation imposed during its bailout. The warning came as the European Commission published the first full set of economic recommendations for the State since it exited its programme in December.

In its country-specific recommendations for the EU, published yesterday, the European Commission highlighted Ireland’s high healthcare expenditure, excessive legal fees and non-performing SME loans as some of the main issues facing the economy.

Speaking in Brussels yesterday, economics commissioner Olli Rehn said that while Ireland had successfully returned to private market funding and had reduced its unemployment rate, the country needed to continue with reforms implemented during the bailout.

“Many reforms initiated under the programme were of a long-term and structural nature, and it was in fact never expected that the process would stop due to the completion of the programme. Therefore it’s only natural that the recommendations reflect continuity with the efforts undertaken during the programme.”

Government tensions

The recommendations come as the two Government parties prepare to begin detailed negotiations on next year’s budget amid tensions about the scale of the cuts needed.

Launching her bid to become Labour Party leader, Minister for Social Protection Joan Burton said last weekend that she did not believe there was a need for €2 billion in spending cuts in the budget.

In its analysis, the European Commission noted that Ireland’s expenditure on public healthcare was one of the highest in the EU, at 8.7 per cent of gross national income, compared with an EU average of 7.3 per cent. This is despite Ireland’s relatively young population.

Financial and accounting systems in the Irish health system were fragmented across healthcare providers, the report found, while pharmaceutical spending, particularly on out-patient drugs, was particularly high.

Ireland was also identified as one of a handful of EU countries with a relatively low level of female participation in the workplace, which led to a growing risk of poverty and social exclusion for children, according to the analysis. It called for improved access to more affordable and full-time childcare, particularly for single-parent households.

Key challenge

The high cost of legal services was also identified as a key challenge for the Irish economy, with the commission urging the Government to enact the Legal Services Regulation Bill by the end of this year.

“Unlike for other professional services, legal services costs have failed to adjust downwards since the onset of the crisis, in part due to insufficient competition,” the report said.

Lending to SMEs remained weak, the report found, while banks needed to make further progress in tackling non-performing SME loans.

The corporate tax system also came in for criticism yesterday, with EU tax commissioner Algirdas Semeta urging Ireland to do more to address aggressive tax planning by companies.