Written answers

Thursday, 24 November 2016

Department of Finance

Fiscal Compact Treaty

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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66. To ask the Minister for Finance his views on the EU Commission's statement that Portugal and Spain will not face any sanction for breaking the fiscal compact. [36576/16]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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On 12th July the EU's Council of Economic and Finance Ministers (ECOFIN) made decisions, under Article 126(8) of the Treaty of the functioning of the European Union, that Portugal and Spain had not taken effective action to correct their excessive deficits. The ECOFIN Council subsequently adopted decisions on 8th August giving notice of revised excessive deficit correction deadlines under Article 126(9) of the Treaty and to cancel fines for both countries. 

In addition to the Council decisions to cancel the fines for both Member States, the decisions under Article 126(8) were also to be followed by Commission proposals for the suspension of part of the commitments under the European Structural and Investment Funds (ESIF). It is important to note that to lift the suspension of ESIF, both member States were required to take effective action in response to the revised Council recommendations and report on it by mid-October of this year, at the same time as presenting their Draft Budgetary Plans. 

In line with this timeline, both Member States have now reported on action taken and in response, the Commission's careful analysis indicates that both Portugal and Spain have taken effective action to address their excessive deficits. Accordingly, there will be no suspension of ESIF funds.  

In view of the Commission's considered opinion that that both Member States have delivered on their policy commitments, and that effective action has been taken to address their excessive deficits, we can support lifting the suspension of funds at this stage. 

On the issue of flexibility more generally, it is clearly important that the rules are implemented in a fair and consistent manner and that all Member States are treated equally concerning the application of EU budget laws. This is essential for continuing credibility. However, some degree of flexibility should be allowed in certain circumstances, where this is appropriate and within the rules of the Stability and Growth Pact. 

For instance, the deadline for Ireland to correct its excessive deficit was extended on two occasions, in 2009 and in 2010, due to unexpected adverse economic events with major unfavourable consequences for government finances.  Ireland's excessive deficit has since been corrected in a durable manner and the country is now subject to the preventive arm of the Stability and Growth Pact.

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