Mairead Farrell (Galway West, Sinn Fein) | Oireachtas source

We have had sight of the proposed reform of the EU fiscal rules and governance framework. The Government had not prioritised this but the Joint Committee on Finance attempted to engage with the process of reform. The new proposals will take time to work their way through different stages at EU level before they become law but, having now seen them, it seems to be a case of the new rules being just like the old rules.

I am flabbergasted that there is no change to the 3% rule, which provides that member states must keep their deficit within 3% of GDP. This rule is completely arbitrary and is not grounded on any kind of empirical evidence. It is not some kind of equilibrium rule that states that a 4% deficit is unsustainable whereas one of 3% is. The finance committee got to the origin of the rule. A low-ranking French bureaucrat working at the French treasury came up with it more than three decades ago. His rationale was that, at the time, France was running a deficit of approximately 1.8% or 2%, which was a little too close for comfort and 3% gave a bit more breathing room. That was simply it. When we cast our minds back to the austerity period when Fianna Fáil- and Fine Gael-led governments fell over themselves to make cuts in order to get the deficit below 3%, this was all because of a completely arbitrary rule.

This is known as the debt rule where a member state should not have debts exceeding 60%. It was widely expected that this should be increased to 100% at the very least because of all the pandemic spending but that did not happen. The vast majority of member states have debts above 60% of GDP. Besides that, the quantum of debt is a poorer measure of sustainability than borrowing costs. There is no change to the investment clause, which could have exempted green investment from deficit and debt considerations, and this was a very poorly missed opportunity, especially, as was mentioned earlier, in light of the US introduction of the Inflation Reduction Act, which allows for major subsidies to both US companies and even European ones. That is why so many sensible experts have been concerned about the risk of de-industrialisation to the EU economy, as companies will flock to the US.

There has been the removal of the structural deficit calculation, which is welcome given the fact that it had become so complicated as to have become unworkable but, for the most part, the EU Commission has decided to keep to its usual modus operandiof muddlling through. This was a missed opportunity. It is quite unfortunate and is something that the Minister of State might also take a look at.

See this speech in context