Professor Karl Whelan:

Yes, a couple of things. I am not aware of any Irish economist who has yet participated in making a submission to this review from the European Commission. In general, we are all busy and it is difficult to find time or to know what impact an individual input from an academic would have. I play a role with the European Parliament engaging with monetary policy in the ECB and making advice and recommendations there. I do that on a more formal level. That is to what I tend to largely restrict myself.

On the issues of what will happen with inflation and what will happen with the debate on the fiscal rules, they will not be totally separate. The ECB sees price stability as its goal but the mood music around the discussion over the next year on the reintroduction of the fiscal rules will be affected by inflation. Clearly, some countries would like to reintroduce the fiscal rules as they have existed previously and to have a quick and fast reintroduction versus quite a number of countries that would like to see a milder version of the rules. If it looks as though inflation is possibly getting out of control European-wide, then, to use economic parlance, the hawks will have a better argument than the doves that fiscal policy needs to be playing its role in constraining the economy.

The greater problem with the fiscal rules is that they are very badly designed. They have those two numbers, the 60% debt-to-GDP ratio and the 3% deficit. Somebody plucked them out of the air in the late 1980s or early 1990s. They might have been appropriate then but they are not now and that is the problem. Ideally, what we would need is some form of treaty change but a treaty change in any controversial area is extremely difficult to executive. In practice, we are seeing proposals around, for example, while the 60% ratio is formally in the treaty the Commission would really only focus on encouraging countries whose debt ratios are above 100% debt-to-GDB ratio. We may see things like that but this will be one of the big European bun fights over the next year or so.