Ireland may get flexibility on EU fiscal rules due to Brexit- Hayes
Vice President of the European Commission Valdis Dombrovskis has written to Brian Hayes MEP and stated that the effects of Brexit could potentially be considered as an ‘exceptional circumstance’ for Ireland under EU fiscal rules, thereby giving us leeway on debt and deficit targets. Mr. Hayes said:
“Commissioner Dombrovskis has opened the door for Ireland to be given flexibility on EU fiscal rules in the event that Ireland suffers from exceptional and short-term economic costs from Brexit. In reply to my question, he describes Brexit as an ‘important downward risk’ for Ireland.
“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.
“Commissioner Dombrovskis has made it clear that a Member State can request temporary flexibility from EU fiscal rules if they are hit by ‘well-identified costs’ from an exceptional event. This ‘exceptional circumstances’ provision has been used twice in the past – firstly for Member States who were getting an overwhelming inflows of refugees and secondly for Member States burdened with security costs due to terrorist threats.
“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. The Commissioner has given us a strong signal that Ireland can avail of these flexibility provisions if the effects from Brexit become overwhelming.
“We don’t know what is going to happen with Brexit; it is impossible to predict. As the Department of Finance has said, in a worst case scenario we could suffer potential losses of €20 billion over a decade which would be a major shock to our public finances. Our public finance position has regained stability following the crisis but Brexit could leave it in a precarious position
“As it stands, the EU fiscal rules already impose tight restrictions on government spending on our public services. If the impact of Brexit were to limit our expenditure further, we need to be ready to use all tools available to minimise the negative impact to our public finances.”