EU pact ‘failed to predict Irish fallout’

GOVERNOR of the Central Bank Patrick Honohan said last night the EU’s stability and growth pact, which sets out the budgetary guidelines for EU member states, failed to identify the excessive impact a slowdown in economic activity would have on the flow of taxes to the state’s coffers.

Addressing the Institute of Certified Public Accountants in Dublin last night, Mr Honohan said while the pact offered broad guidelines on how governments should manage their budgets, it was not equipped to identify what would happen when the Irish economy fell out of bed after the property boom ended.

While there was some relaxation in Government policy during the last two years of the boom, the real problem was that the pact failed to identify the inherent flaw in the economy, which had been its over-reliance on certain forms of taxation.