Pearse Doherty (Donegal, Sinn Fein)
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20. To ask the Minister for Finance if he will request flexibility with regard to the fiscal rules in view of the well documented impact of Brexit on the economy; and if he will make a statement on the matter. [23358/17]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy is no doubt aware and, as I have previously outlined for the Deputy in Parliamentary Question Number 43 of 4 April this year, the fiscal rules to which Ireland is subject to have direct application through a number of EU regulations.  The European Commission has repeatedly emphasised that budgetary discipline is assessed against reference values that do not differentiate amongst different types of expenditure as any deficit-financed expenditure must be repaid through future taxes. Furthermore, granting special treatment to certain kinds of public expenditures could create incentives for creative accounting.

The Commission’s guidance on the implementation of the ‘unusual event clause’ in the preventative arm of the Stability and Growth pact (SGP) allows for exceptional spending directly linked to unusual events outside of the control of Government, if this spending does not endanger fiscal sustainability in the medium term. This clause is granted on the basis of individual case-by-case assessments and, to date, has only been granted to six Member States in light of refugee-related costs and three Member States following submissions based upon security-related expenditure. It should also be noted that any Member State availing of this clause must still meet their SGP obligations when the additional spending on the unusual event provided for in the clause is excluded.

Accordingly, any application for leniency under this clause would require that Ireland demonstrate that the British exit from the EU has had a “major impact on the financial position of the general government”. Notwithstanding the fact that the sharp appreciation of the euro-sterling bilateral rate has been the most immediate impact from Brexit and is one of the principal factors behind the decline in the value of merchandise exports to the UK last year, no material impact on Ireland’s general government balance has been observed to date. This is not surprising given that the negotiation on the terms of the UK exit have yet to commence in substance and will not conclude until 2019. 

Nonetheless Ireland is currently exploring existing and possible future EU measures that could potentially assist Ireland in mitigating the effects of the UK’s withdrawal on specific Irish businesses and economic sectors.  Ireland will also, in light of developments, continue to make a strong case at EU level that the UK’s withdrawal represents a serious disturbance to the Irish economy overall and that we will require support.