Stephen Donnelly (Wicklow, Fianna Fail)
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144. To ask the Minister for Finance if he raised the relaxation of fiscal rules through the implementation of the unusual event clause in the context of the impact of Brexit on Ireland at the Eurogroup meeting on 22 May 2017; and if he will make a statement on the matter. [25409/17]

Michael Noonan (Limerick City, Fine Gael)
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I did not raise the possibility of utilising the unusual event clause when at the Eurogroup meeting last week as Ireland currently does not qualify for its use. As outlined for Deputy Doherty in PQ number 24 of the 18/05/2017 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 to 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”. Objectively, no such 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. 

Furthermore, the European Commission has repeatedly emphasised that budgetary discipline is assessed against reference values that do not differentiate amongst different types of expenditure. Any deficit-financed expenditure must be repaid through future taxes. Any rule that grants special treatment to certain kinds of public expenditures could create incentives for creative accounting.

Nonetheless Ireland will explore 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. 

Stephen Donnelly (Wicklow, Fianna Fail)
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145. To ask the Minister for Finance if planning has started for a scenario in which no deal is reached in Brexit negotiations; if this planning has been completed; if he will publish the results of this scenario planning; and if he will make a statement on the matter. [25410/17]

Michael Noonan (Limerick City, Fine Gael)
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The Department of Finance has been assessing and preparing for the impact of Brexit since well before the referendum on 23 June 2016. Work was carried out in the Department to assess the potential economic and financial sector implications arising, including the study, published in November 2015, under the ESRI-Department of Finance research programme, entitled 'Scoping the Possible Economic Implications of Brexit on Ireland'. The Department's work has been carried out within the whole-of-Government arrangements overseen by the Department of the Taoiseach.

Following the result of the UK referendum, work has been intensified across the whole of Government level, including in my own Department, to ensure that Ireland’s interests are protected in the negotiations at EU level and to ensure that Ireland will be in position to mitigate the negative economic impacts arising from Brexit.  In my own Department, a Brexit Unit was established in July 2016, within the EU and International Division, to oversee and coordinate this work and to act as a key liaison point with the Department of the Taoiseach, in particular. In addition, the Department of Finance staff complement in the Irish Permanent Representation to the EU in Brussels has been strengthened.  The challenge which we face as a result of Brexit is mainstreamed across all divisions of my Department and this is reflected in business planning.

The Department of Finance contingency work is ongoing and rightly continues to examine all scenarios, including the scenario of the UK leaving the EU without an agreement in place. This work is an important input to the whole-of-Government work being overseen by the Department of the Taoiseach. In accordance with its role, my Department continues to monitor the economic impacts and carry out relevant analysis, and to frame budgetary policy advice in this new context.

We know from our own published research that the potential impact on the Irish economy is significant.  The medium to long term economic impacts of a ‘hard Brexit’ with reversion to the WTO trade rules are set out in the November 2016 joint paper with the ESRI ‘Modelling the potential macroeconomic Impact of Brexit on Ireland’. Looking at the effect ten years after a UK exit, a hard Brexit scenario results in the level of GDP being almost 4 per cent below what it otherwise would have been in a no-Brexit scenario.

It is important to recognise that the full impact of the UK's exit is only expected to materialise over time. As we cannot control the international environment, we will need to continue to improve our competitiveness, including by focussing on costs we can control, by boosting our productivity and ensuring sustainable public finances.