EU rules ‘need to be relaxed’

EU budgetary rules need to be relaxed to allow Ireland to borrow more money for infrastructure projects, the Tánaiste said yesterday.

Flexibility in the EU Growth and Stability Pact was required as Ireland had a low rate of debt and did not need to be so restricted in terms of the amount of borrowing, Ms Harney said.

At a Progressive Democrats conference on the future Europe, the Tánaiste said she agreed with the economic think tank, the Economic and Social Research Institute, when it said the Government should push for an easing of budgetary restraints. But also at the PD conference, former EU Commissioner Peter Sutherland warned against breaking away from the stability and growth pact.

EU countries should be cautious in allowing changes to the strict rules, which limit borrowing to just 3% of Gross Domestic Product.

Although there was room for some changes, the pact had served Europe well and underpinned the euro emergence as a strong currency, he said.

According to Ms Harney, Ireland’s fiscal situation differed from other EU countries and the pact was also supposed to encourage economic growth. “We are not talking about tearing up the pact. What we are looking for is flexibility. The ESRI are right. That would be the view of many members,” she said.

The ESRI said Government control of spending this year appears to be too tight and this may be contributing to the economic slowdown. The ESRI says there is no need to restrict necessary investment and all infrastructure projects with an economic return should proceed.

Also at the conference, the Tánaiste said the EU was at a critical moment in terms of its common foreign and security policy. Cautioning against extreme views, she said areas of foreign policy where member states agree already should be pursued.

“Our liberal democratic values will be the stronger within Europe, across the Atlantic and in the world if we work for partnership rather than confrontation,” Ms Harney said.

Meanwhile, former PD leader Des O’Malley said yesterday he was pleased to be appointed by the Government to a top European bank job.

Earlier this week, Mr O’Malley was appointed as an alternate director of the European Bank for Reconstruction and Development with an after tax salary of €100,000.

Attending the conference, Mr O’Malley said with his political experience, he believed he had the expertise to make a contribution to the London-based bank which provides project finance in central and eastern Europe and Russia. “I was a minister for a long time, 13 years, mainly in the industry area. I hope I have something to offer in that way,” he said.