EC Says Irish Budget Deficit Within Eurozone Rules

by Jason Gorringe, Tax-News.com, London

03 February 2003

In its annual budgetary assessment of EU member states, released on Thursday, the European Commission announced that Ireland's budget deficit is likely to remain well within the limits set by the Stability and Growth Pact, despite the fact that the Irish government failed to heed the Commission's recommendations last year.

'The fiscal stance in 2002 was strongly expansionary, in contrast with a specific budgetary recommendation in the Broad Economic Policy Guidelines,' the EC report revealed.

According to experts, this expansion left the deficit at around 1% of GDP, and it has been suggested that this is likely to grow to 1.2% in 2004 and 2005. However, this year's strict budget is set to reduce this figure by 0.5% of GDP, and the European Commission noted in its report that the 1.2% prediction for 2004/05 includes large contingency provisions which may well not be spent.

Taking this, and the Republic's low national debt into consideration: 'such a small cyclically adjusted deficit is consistent with the EU's Growth and Stability Pact', according to the EC assessment report.

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