Michael Noonan (Limerick City, Fine Gael)
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There are two sources of flexibility within the EU rules designed to encourage Member States to undertake public investment. Firstly, within the expenditure benchmark pillar of the fiscal rules investment in capital formation is granted favourable treatment.  Within the rules spending on capital formation is smoothed over four years with the result that only one quarter of the increase in investment for capital formation purposes must be funded in the first year from within the fiscal space available under the expenditure benchmark. This provision demonstrates that the rules are designed to actively promote public investment and capital spending.

As I have stated previously, the loosening of the medium term budgetary objective (MTO) to which Ireland is subject results in an additional €1.5 billion in fiscal space becoming available once the MTO is achieved. Taking account of this, together with the benefit of the capital smoothing treatment explained above, the Programme for Government includes a commitment to deliver an additional cumulative €4 billion in capital spending. We are also leveraging additional funding to invest in the development and construction of housing. The joint venture fund Activate Capital established by Ireland's Strategic Investment Fund (ISIF) is a strong example of such a commitment.

The second source of flexibility - and that to which the Deputy refers -  is the 'investment clause' provision within the Stability and Growth Pact.  Subject to meeting certain eligibility criteria temporary leniency may be granted with regard to the required pace of structural budgetary adjustment. The purpose of this is to promote greater spending on investment projects. Where it can be shown that projects generate increased levels of investment with a major net positive impact on the growth potential of the economy and on the sustainability of the public finances, the need for budgetary adjustment may be temporarily deferred by up to 0.5% of GDP in one year.

However, the eligibility conditions necessary to invoke this clause are restrictive, requiring the presence of negative real GDP growth or the existence of a negative output gap of at least 1.5 per cent. On the basis of my Department's current macro-economic outlook, as published in the 2016 Stability Programme Update on 27 April, this condition alone excludes Ireland from applying for the clause at present and for the foreseeable future.