Eoin Hayes (Dublin Bay South, Social Democrats)
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64. To ask the Minister for Finance the steps that have been taken to review fiscal rules and the Government's approach to fiscal policy in light of Germany’s policy change with regard to compliance with EU economic governance framework; and if he will make a statement on the matter. [28256/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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In March 2025, Germany adopted a constitutional reform of its national fiscal framework. The reform centred on three key changes: i) setting up a new fund for infrastructure of up to €500 billion outside the scope of the German ‘debt brake’, ii) exempting defence expenditure above 1 per cent of GDP from the debt brake, and iii) allowing federal states to take up new net borrowing of up to 0.35 per cent of GDP annually.

Aside from changes to their domestic budgetary framework, Germany remains subject to the EU fiscal framework, which was recently reformed in April 2024. The EU framework requires Member States to maintain headline deficits below 3 per cent of GDP, and to maintain a debt-to-GDP ratio below 60 per cent of GDP or declining at a sufficient pace towards this reference value.

Due to the timing of its elections, Germany has yet to submit a medium-term fiscal-structural plan under the new EU fiscal framework but is expected to do so soon. It will then be assessed for compliance with the EU fiscal framework by the Commission before it can be endorsed by the Council. The plan will set out Germany’s net expenditure path over the next four years and should provide more clarity on how the German Government intends to proceed.

Ireland submitted its first medium-term plan in October last year and recently published the Annual Progress Report. I am very supportive of the revised fiscal architecture and believe that it is essential to have a robust fiscal governance framework at EU level. For countries such as Ireland that have a good fiscal position, a key strength of the new framework is an emphasis on Member State ownership of their own fiscal trajectory.

This flexibility will allow us to respond to the unprecedented level of uncertainty in the global economy. As a small open economy, Ireland has a unique vulnerability to a reduction in global trade. Accordingly, fiscal policy will have to strike a delicate balance between continuing to support our public services, investing in key infrastructure and safeguarding the public finances.