Mary Lou McDonald (Dublin Central, Sinn Fein)
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185. To ask the Minister for Finance if under European Union fiscal rules the required annual structural budget balance improvement for Ireland from 2016 must be at least 0.5% each year and that the higher levels of adjustment contained in the Government's fiscal plan for each year from 2016 to 2021 is a policy choice made by Government rather than a requirement under the fiscal rules. [46703/15]

Mary Lou McDonald (Dublin Central, Sinn Fein)
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186. To ask the Minister for Finance the gross and net fiscal space available to the Government for each year from 2016 to 2021 if the structural balance improvement is maintained at 0.5% per year from 2016 to 2021. [46704/15]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 185 and 186 together.

Under the Stability and Growth Pact (SGP), Ireland is obliged to be at or make rapid progress towards its Medium Term Objective (MTO) of a balanced budget in structural terms. This obligation also stems from the Fiscal Compact, to which Ireland acceded following the referendum in 2012, and has also been enshrined in domestic legislation through the Fiscal Responsibility Act 2012.

As Ireland is not yet at its MTO, it must improve its structural balance by more than 0.5% of GDP per annum until the MTO is reached. In the Country Specific Recommendations (CSRs) adopted by the Council on 14^thJuly 2015 an improvement of 0.6% was stipulated for 2016. The forecasts in the Budget for subsequent years were based on a minimum annual structural improvement consistent with the table below. 

The required adjustment for 2017 will be set in the CSRs to be adopted by the Council next July on the basis of a European Commission recommendation. The Commission has clarified over the last year the basis on which it will make its recommendation for an appropriate improvement in the structural balance for each Member State. Its analysis takes account of the debt-to-GDP ratio, the size and sign of the output gap and whether the economy is growing faster than potential.  The matrix describing the required structural adjustment based on these criteria has been published by the Commission and is outlined below. The rationale for the differentiated approach is to better align the required fiscal adjustment with the prevailing economic environment.

Matrix for specifying the annual fiscal adjustment towards the Medium-Term Objective (MTO)

Accordingly the minimum level of the required improvement in the structural balance is set for each Member State in the CSRs addressed to them by the Commission and Council in accordance with the above matrix of requirements.

Projections in Budget 2016 provide for the cost of demographic pressures and the public capital plan over the period to 2021, together with the cost of the Lansdowne Road agreement to 2018. The implied pace of structural adjustment, consistent with these assumptions is set out in the Budget document. Were Ireland to pursue an annual structural adjustment below the level stated in the Budget, in terms of a broad order of magnitude each 0.1% would translate into about €67 million of fiscal space in terms of additional permitted spending each year under the expenditure benchmark. It should be borne in mind, however, that any additional fiscal stimulus would have an economic impact, which would in turn, impact the level of fiscal space available.