Micheál Martin (Cork South Central, Fianna Fail)
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128. To ask the Minister for Finance if he will report on the Fiscal Advisory Council and its recent recommendations to Government; and if he will make a statement on the matter. [27165/14]

Michael Noonan (Limerick City, Fine Gael)
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The Fiscal Council's most recent Fiscal Assessment Report was published on 17th June 2014. The Fiscal Council's analysis and recommendations are being considered by my Department, and will feed into the preparation of its updated economic and fiscal projections in the Budget. As is my usual practice, we will be publishing a comprehensive response to this report.

Firstly, it is important to note that the report stated that the fiscal stance remains conducive to prudent economic and budgetary management and that the Government is complying with the fiscal rules. The Council recommends that there should be no deviation from the €2 billion consolidation in 2015. Let me be clear. The Government has repeatedly said that it will do whatever is necessary to ensure that the 3% of GDP target will be met. Ireland has consistently met or exceeded the fiscal targets to date and Budget 2015 will set out the measures necessary to achieve this goal. The composition of Budget 2015 measures will be finalised in the context of budgetary discussions, informed by the latest economic and fiscal data.

The Council also states that the Government's recently published fiscal adjustment plans for 2016-18 appear to go beyond the minimum requirements of the new fiscal framework. The rules specify the need to make progress towards the medium term objective (MTO) of a balanced budget after taking into account the impact of the economic cycle (i.e. in structural terms). In particular, the preventive arm sets out the requirement for an annual correction in the level of the structural balance (an improvement of 0.5 per cent per annum as a benchmark), without specifying when this position should be achieved.

In contrast, the Treaty on Stability, Coordination and Governance in the EMU (sometimes referred to as the 'fiscal compact') tasked the European Commission with producing an actual timetable for participating Member States to achieve their MTOs. Last summer, the Commission outlined that Ireland should achieve its MTO by 2018. On this basis, the April 2014 Stability Programme Update set out a path for achieving a balanced budget by 2018. Until the 2014 Country Specific Recommendations (CSRs) are formally adopted by the European Council (early July), Ireland remains subject to the requirement of meeting the 2018 deadline.

Following discussions on the necessary consistency between the fiscal compact and the Stability and Growth Pact (SGP), and ahead of the formal adoption of the 2014 CSRs, the European Commission has clarified that the deadline for MTO achievement is not fixed but the required annual improvement in the structural balance is. Consistent with SGP rules, Member States not at their MTOs must improve their structural balance by at least 0.5 per cent of GDP per annum.

So, in summary, last year the requirements of the fiscal compact set out a deadline for MTO achievement, whereas from this year onwards, the focus will be on the required fiscal effort. Therefore, once the 2014 CSRs are formally adopted, we will no longer need to reach a balanced budget by 2018; instead, we will have to deliver the required annual improvement in the structural balance.