Michael McGrath (Cork South Central, Fianna Fail)
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Question 48: To ask the Minister for Finance his views on the feasibility of a European wide stimulus package; the manner in which this would be funded; the impact on the public finances in Ireland; and if he will make a statement on the matter. [24724/12]

Michael Noonan (Limerick City, Fine Gael)
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I would point out that fiscal sustainability and measures to promote economic growth are not necessarily incompatible. In this context, the Taoiseach has consistently sought to have growth moved up the European agenda. My view is that measures to boost the economic growth rate can play an important role in addressing the current crisis in the EU. In fact, implementing policies to boost growth in the euro area is one of the key parts of the 'five-point strategy' to tackle the crisis agreed by the euro area Heads of State or Government last October. Implementing structural reforms can have a positive effect in terms of boosting the rate of growth in many Member States and my view is that these should be implemented without delay.

In addition, there are calls in some quarters for fiscal measures to stimulate growth in the short term. A number of considerations arise in this regard. For instance, for those Member States subject to market pressures, it is clear that these have little, if any, room for budgetary manoeuvre. It goes without saying, however, that consolidation in these Member States should be pursued in a manner which is as growth-friendly as possible. It is also important to bear in mind that additional public sector borrowing designed to stimulate the economy in the short-term could increase public indebtedness and may well act as a restraint on medium term economic growth, thus having a counter-productive impact.

Having said this, borrowing at a reasonable cost – through for instance the European Investment Bank – to fund projects that yield a sufficient rate of return may be justified, and Member States that can afford to pursue such an approach are of course free to do so. Indeed, we are pursuing all options in that regard. It is also worth pointing out that the Government has a public capital programme amounting to €17 billion over the period 2012 – 2016.

In the case of Ireland we must be particularly conscious of the impact that any fiscal stimulus would have on the public finances. As the deputy will be aware, the Government has secured the approval of the Troika to use a portion of the funds raised from the sale of state assets to support jobs and growth. It is crucial that any such investment yields maximum benefits in terms of boosting the long-term growth of the economy and minimum costs in terms of the impact on the public finances.