Department of Finance under pressure to seek easing of EU spending rules

The Department of Finance has been urged to demand the EU relaxes Ireland’s fiscal spending rules after senior officials admitted the housing crisis and other social issues are a “risk” that cannot be ignored.

Department secretary general Derek Nolan, second secretary general Ann Nolan, and chief economist John McCarthy came under pressure to seek the change amid growing public concerns over the two-tier nature of the recovery.

Speaking at the latest Dáil Public Accounts Committee meeting and as Finance Minister Paschal Donohoe appeared to open to the door for such a move at a separate finance committee meeting, Mr Nolan and his most senior officials said a number of financial “indicators” show Ireland’s recovery is continuing apace.

However, they came in for criticism from Independent TD Catherine Connolly and Sinn Féin TD David Cullinane, who raised concerns over the failure to ensure hidden social problems are addressed.

Asked by Mr Cullinane if he agrees the fiscal rules are “not fit for purpose” and “what changes to the fiscal rules” are now necessary after Mr Donohoe’s suggestions in the finance committee, Mr Nolan said the rules “are probably a good thing as a framework”.

However, referencing that the rules can sometimes act as a “straitjacket” and mean Ireland’s economic outlook is more conservative than US political group the Tea Party, Mr Nolan said “it’s possible we’ve gone too far”.

PAC chair and Fianna Fáil TD Sean Fleming said there was an “obsession” with staying on balance, but the department’s John McCarthy said while “we don’t live in a bubble” and ignore social issues, “loosening” fiscal constraints could mean “the troika is back again”.

The comments came after Ms Connolly criticised the department for highlighting top-level “indicators” of an economic recovery while ignoring housing, health, and social services crises. Asked by her if they should not be “very worried” about the housing crisis — which Mr Fleming later referred to as “social engineering” — Mr Moran said the department was fearful of “rapid pace” house price rises and over-leveraging of borrowers.

At a later PAC meeting last night, Department of Public Expenditure and Reform secretary general Robert Watt responded to the same call for a relaxation of EU fiscal rules by saying capital spend is already increasing.

Meanwhile, Department of Finance officials have also been questioned over the Apple EU tax case, saying it is still being raised in Brussels meetings and is likely to see Ireland appear in court at the “tail-end of 2018”.

Responding to Social Democrats TD Catherine Murphy, Mr Moran also admitted last year’s CSO GDP surge — linked to multi-nationals rebasing themselves here — came as a “surprise”, while Mr McCarthy said “it was a shock”.

“We had [economist Paul] Krugman’s leprechaun economics tweets. It was a shock. To be honest, it still is.”


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