Noonan seeks extra €1.5bn but faces ECB opposition

Finance Minister Michael Noonan could have an extra €1.5bn to spend in this year’s budget, but he may have to overcome objections from the ECB and Germany first.

He argued for more flexibility in how he spends his budget when fellow EU finance ministers agreed to give France two more years to cut their budget overspend, having failed to live up to promises.

Figures due out tomorrow should strengthen the minister’s case as he expects GDP growth in 2014 to be around 4.7% — the highest in the EU — while he will cut the budget overspend to a little over 1% next year, well ahead of target.

However, because of what Mr Noonan described as “bizarre rules”, the commission says he can spend only a fraction of the extra money taken in by the Exchequer to create growth and jobs.

He said he was not planning to break EU rules on national budgets but pointed out that several countries were given concessions on how the rules were applied. “I have problems as well and I need flexibility.”

He said he supported France, but it gave him a political problem because Irish people would fear a return to a time when France and Germany were allowed break the rules when others were not.

“The argument was made that a two-tier Europe was emerging and the risk is that we are moving back into that political space,” he said.

He told the meeting his government was facing an election and said: “I do not want to be treated with derision by my electorate.”

Afterwards he said the available sum could be 1, 2 or 3% of the €50bn budget, but he did not know how and if he would spend the money. That would be up to the Cabinet.

Awards commission vice president Valdis Dombrovskis appeared to be very positive about Mr Noonan’s demand. He said they will look at “the concern of having a level playing field”.

However, Mr Noonan will have a battle on his hands to convince the budget hawks and the ECB. They warned that the credibility of the euro system could be at risk if rules were not observed and were especially concerned about the rules on putting all spare money towards paying off national debt.

Germany’s finance minister Wolfgang Schäuble said that high indebted countries needed to bring down their debt. He said his own country’s debt at 75% of GDP was far too high. Ireland’s is around 110%.

Senior diplomats from other countries said that Mr Noonan was “very tough” in what he had to say, but he won support from a number of countries including Spain and Portugal.