Programmes such as the four-year plan should become a permanent feature of Irish political and fiscal life, European commissioner for economic and monetary affairs Olli Rehn said in Dublin this afternoon.
In an address to the Institute for International and European Affairs, the commissioner welcomed the Government’s announcement last week of a multi-annual consolidation strategy which confirmed its commitment to bringing the deficit below 3 per cent of Gross Domestic Product by 2014.
“I look forward to the greater degree of detail of consolidation measures which the Government intends to provide shortly. These medium-term budgetary objectives and their concrete implementation with expenditure ceilings should become a permanent feature of fiscal policymaking in Ireland,” he said.
Conceding that the EU’s Stability and Growth Pact was not applied as rigorously as intended and that it was not broad enough in scope, Mr Rehn said: “It is by now clear that much of the economic instability in Europe is not only due to budgetary indiscipline. In the run-up to the crisis many unsustainable imbalances emerged in the private sector as well.
“In the case of Ireland in particular, we need to recall that sovereign debt has not been at the origin of the crisis. Rather, private debt has become public debt. The financial sector has misallocated resources in the economy and then stopped working. It needs reform.
“Indeed, earlier and better surveillance of these imbalances right across the EU could have helped to avoid the worst excesses. However, many of the private sector imbalances, such as excessive credit growth and large current account imbalances, were not at the core of the scrutiny framework used under the EU's existing surveillance arrangements.
“The Stability and Growth Pact was created to ensure that no country would pursue fiscal policy that would endanger the financial and economic stability of the other member states and the euro area as a whole. It has not done that, mainly for two reasons.
“First, because it was not applied as rigorously as intended. Second, because the Stability and Growth Pact was not broad enough in scope, as it left non-fiscal economic imbalances outside the scope of surveillance. Ireland and Spain are unfortunate examples of this,” he said.
The audience for the Commissioner’s speech included former taoiseach Dr Garret FitzGerald, former European Parliament president Pat Cox, former Irish commissioners David Byrne and Richard Burke and former minister for economic planning and development Prof Martin O’Donoghue.