Commission Assesses Stability Programmes Of Ireland, Greece And Spain

by Carla Johnson, Investors Offshore.com, London

20 February 2008

The European Commission has this week assessed the updated stability programmes of Ireland, in addition to those of Greece and Spain.

Ireland is being encouraged to maintain a balanced budget in structural terms while letting the automatic stabilisers absorb the slowdown in the economy, reflecting developments in the residential property sector and a deterioration of the economic outlook in key trading partners.

Ireland submitted a new update of its stability programme on 5 December 2007, covering the period 2007-2010.

The EC observed on Tuesday that:

"After years of budgetary surpluses which reached +2.9% in 2006, the Irish budgetary position moved closer to balance in 2007 and is expected to turn into a small deficit this year and remain there until the end of the programme."

"This reflects an adjustment to more normal, but still very healthy, economic growth levels including thanks to a return to a more sustainable activity in the housing sector after a decade of buoyant economic growth. Ireland is also affected by the expected slowdown in the United States and in the United Kingdom, both significant trading partners."

"The public debt remains well below the 60% reference value in the EU Treaty, which is necessary in view of the expected increase in pensions and other age-related costs."

It concluded:

"In view of the Commission assessment and also in the light of the April 2007 Eurogroup orientations for fiscal policies, Ireland is invited to (i) keep to the MTO in 2008 and thereafter, by maintaining firm control over expenditures; (ii) in view of the significant projected increase in age-related expenditure, improve the long-term sustainability of public finances by implementing further pension reforms."

Two groups of countries were already assessed in January and discussed at the 12th February EU Finance Ministers Council. On 13th February, the Commission examined a third group of programmes.

The programmes from the third and fourth group are expected to be discussed at the 4th March EU Finance Ministers Council.

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