Mr. Carlos Martínez Mongay:

I thank Deputy Calleary for his questions. I will try to address the so-called contradiction. I remind the Deputy the Commission communication refers to the fiscal policy stance in the euro area. The Commission began by analysing the economic cycle in the euro area. It sees aggregate growth in the euro area as resilient but still low. It also sees that inflation clearly remains below 2% and that monetary policy in the euro area has already reached the zero lower bound. Nominal interest rates are zero, which means there is not much room for manoeuvre in monetary policy.

At the same time, the Commission sees aggregate domestic demand in the euro area as still weak. On this basis, the Commission considers the fiscal policy stance in the euro area should be positive, which means in those member states with room for expansion in fiscal policy it should be expansionary and positive. In considering the fiscal policy stance of other member states, the Commission also considers the composition of the adjustment, which is the distribution of the adjustment in various countries, so that countries with fiscal policy space which have reached the medium-term objective and have low levels of debt have room to extend fiscal policy, but countries which have not yet achieved the medium-term objective and have high levels of debt, and countries still in excessive deficit, should be broadly compliant. This is the case for Ireland. Countries in the corrective arm should continue to consolidate. Where the level of deficit in public finances remains unaffected, the Commission advocates for less extortionate taxes, broadening tax bases and increasing the relative weight of investment. This is what the Commission communication states.

With regard to Ireland, the Commission considers Ireland's budgetary plans are broadly compliant. There are some risks, as the expenditure benchmark may not be fully in line with our recommendations, but Ireland is broadly compliant. We must take into account the growth rates for Ireland and the euro area are very different. For Ireland, we project growth at 3.6% a year and 3.5% the year after. For the euro area, the projection is still 1.5%. With regard to the cyclical position of the country, without entering into a discussion on calculating the output gap, there is consensus the output gap for Ireland is already positive. This means there are risks in principle of over hitting it, which means Ireland does not need to put in place expansionary fiscal policies. In my view, there is no contradiction because we state what the fiscal policy stance of the euro area should be, but we also differentiate between the respective cyclical positions of countries. In this sense, I would not say there are contradictions.

With regard to flexibility, the Commission published a communication in January 2015, and the Council adopted a commonly agreed position on flexibility and clarified the rules under which there could be some flexibility in investment which is equivalent to structural reform. We use the structural reform clause of the Stability and Growth Pact to allow for temporary deviations from the adjustments to the medium-term objective to invest more or enhance investment. The Council stated this clause would apply only to countries with negative growth or a very large negative output gap. These are the conditions and the Council allows for some deviation. I can go through the details if the committee wishes, but I would not like to cover all of the issues in this reply.

With regard to what we predict for next year, the entire euro area has been affected by the tail winds. Of course next year the tail winds may disappear, and therefore we must prepare our economies to be more resilient and ready to adjust to the new conditions. We can deal with other issues later.