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Brexit should be treated as an ‘exceptional circumstance’ under EU fiscal rules – Hayes

Brexit should be treated as an ‘exceptional circumstance’ under EU fiscal rules – Hayes

Brian Hayes MEP today said that the European Commission should clarify whether the effects of Brexit should be considered as ‘exceptional circumstances’ for Ireland, thereby giving us leeway on debt and deficit targets.


“It is abundantly clear that Brexit will have an impact on the economic growth of Member States, particularly Ireland, but also other member states.  The ESRI has estimated that a 1% reduction in UK GDP would reduce Ireland’s GDP by 0.3 percent. The Department of Finance estimated this week that a hard Brexit could cost the Irish economy €20 billion over the next decade.

“Compared to any other country in the EU, Ireland is economically the most vulnerable from Brexit. No other country has such close economic and trading ties with the UK. That is why it is important that the Commission show some flexibility to Ireland under the ‘exceptional circumstance’ provision which is set out under the fiscal rules.

“The Commission has the power to trigger an exceptional circumstance clause under the Stability and Growth Pact (SGP). It would mean that Member States get flexibility in how debt and deficit rules are enforced by the Commission. Under the exceptional circumstances clause, the Commission does not have to trigger the Excessive Deficit Procedure (EDP) if the 3% government deficit target is breached. While we are well below the EDP currently, we may need some flexibility in coming into complete balance should the economy underperform.

“Additionally, exceptional circumstances allows the Commission to be more lenient with sanctions if a Member State does not comply with the fiscal rules.

“We don’t know what is going to happen with Brexit; it is impossible to predict. What I am saying to the Commission is that there needs to be a mechanism in place so that Ireland is able to deal with a negative fallout if that happens. The potential loss of €20 billion over a decade is surely an exceptional circumstance.

“As it stands, the fiscal rules already impose tight restrictions on government spending on our public services. If the impact of Brexit were to limit our expenditure further, the Commission needs to give us clarity as to whether the fiscal rules can be adapted accordingly to ensure that we can continue to fund vital public services at a sustainable level.

“The Commission should clarify sooner rather than later whether Brexit will be treated as an exceptional circumstance for Ireland. This issue will not be part of the EU’s negotiations with Britain. This is something where the Commission has the power to decide independently.”


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