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Minister McGrath welcomes publication of European Commission’s Opinion on Ireland’s Budget 2024 Plan
Minister McGrath welcomes publication of European Commission’s Opinion on Ireland’s Budget 2024 Plan
The European Commission finds that Ireland’s Draft Budgetary Plan is in line with the recommendations adopted by the Council in July.
The Minister for Finance, Michael McGrath TD, welcomes yesterday’s (November 21st) publication by the European Commission of its Opinion on Ireland’s Draft Budgetary Plan (DBP).
Overall, the Commission is of the opinion that Ireland’s DBP is in line with the recommendations adopted by the Council in July which, amongst others, recommended Ireland to maintain a sound fiscal position in 2024.
According to the Commission, Ireland’s structural balance is projected to improve from -0.2 per cent of GDP in 2023 to 0.1 per cent in 2024. As such, Ireland will remain well above its medium-term budgetary objective (MTO) of -0.5 per cent of GDP.
“I welcome the Commission’s opinion that Ireland’s Draft Budgetary Plan is in line with the fiscal guidance provided by the European Council in July’s Country-Specific Recommendations.
The Commission’s findings underline that budgetary policy must not lose sight of the importance of a prudent approach over the medium-term - we must ensure fiscal sustainability so that we are best placed to react to the highly uncertain and evolving environment.
We face significant challenges through the requirement to decarbonise our economy and the need to manage the digital transition. At the same time, publications by my Department have shown that the growth rate is set to slow over the medium- and longer-term, driven by demographic changes.
Such developments show the importance of planning for the future now. With this in mind, the Government announced the establishment of the Future Ireland Fund and the Infrastructure, Climate and Nature Fund as part of last month’s Budget. These important policy instruments will help current and future generations address the fundamental structural challenges we face and work is intensifying on bringing these initiative to fruition.”
Each year, euro area Member States submit Draft Budgetary Plans to the European Commission as part of the European Semester.
Ireland’s Draft Budgetary Plan was submitted to the Commission on 13th October (in line with the 15th October deadline) and is available at: Draft Budgetary Plan 2024
The specification of the content of the Draft Budgetary Plans is set out in a ‘code-of-conduct’ agreed by the Member States in 2011; the requirements are set in GDP terms rather than bespoke measures such as GNI* or modified domestic demand.
The Commission assess the plans to ensure that economic policy among the countries sharing the euro is coordinated and that they all respect the EU’s economic governance rules. The opinion on the draft budgetary plan of each euro area Member State is based on the requirements of the Stability and Growth Pact (SGP).
For Member States under the Preventive Arm of the Pact, it considers the extent to which Member States have implemented their Country-Specific Recommendations (CSRs) agreed by the European Council. The draft budgetary plans are assessed as either compliant, broadly compliant, or at risk of non-compliance.
The economic governance framework in the EU is based on:
- The Treaty on the Functioning of the EU – sets benchmarks for government deficits below 3% of gross domestic product (GDP) and government debt below 60% of GDP
- The stability and growth pact – defines the rules for monitoring and coordination of national fiscal and economic policies
- The six-pack and two-pack legislations – reinforce fiscal surveillance after the financial crisis and create the macroeconomic imbalance procedure to ensure oversight of imbalances emerging outside the fiscal sphere
- Code of conduct documents - guidelines to interpret the six-pack and two-pack legislations.
A review of the current economic governance framework in the EU is currently taking place. As part of this review, the European Commission have put forward proposals to reform the framework. Discussions on these proposals are taking place at technical working groups in the EU.