Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

I thank the delegation for its time.

Last year, the convergence margin was applied because it was deemed Ireland had not hit one of its targets for budgetary correction. The economic logic was that the economy was overheating and, therefore, one cannot buck all of the real correction and one has to overcorrect. Due to the fact that logic was applied, we missed our target which meant a convergence margin was applied which shrank our fiscal space considerably. The argument from all the economists this committee met was that Ireland's economy is not actually overheating. We are at nearly 8% unemployment and there is still potential growth. It was explained to the committee that the calculation was based on a ten-year rolling average of unemployment. As Ireland's unemployment through the crash had been so high, if one applied a ten-year rolling average, it looks like Ireland is at full employment or, indeed, past full employment at 8%. Clearly, it is not. No economist would suggest Ireland's economy is overheating based on an unemployment rate of 8%.

Accordingly, we found ourselves heavily penalised because the accuracy of a rule which no one would defend was applied to Ireland. Does the Commission have a view on that? When we put it to the Irish authorities, the answer was that is the rule and we have to use the ten-year rolling average unemployment and, as such, we are deemed to be overheating. Accordingly, we are deemed to have missed our target and the fiscal space has been contracted significantly by applying the convergence margin. When the rules, to which we have signed up, are not lined up with reality, should the Commission still insist on applying them?

The Commission should still insist on applying them.

I will ask my questions one at a time.