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News : Irish Economy Last Updated: Mar 26, 2015 - 7:30 AM


Burton in Boston begs Berlin to back Budget election bust
By Michael Hennigan, Finfacts founder and editor
Mar 16, 2015 - 8:11 AM

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Joan Burton, tánaiste, with OutVets LGBT/gay veterans group which made history by marching in the Boston St Patrick's Day Parade, March 15, 2015

Joan Burton, tánaiste (deputy prime minister), is in Boston attending St. Patrick's Day events and mindful of her political future at home she is due to present a case for the European Commission to water-down (Irish Water, the controversial public agency, may well be part of her concern) new rules that limit public spending in Ireland —  in effect she is begging Berlin to back a Budget next October that would allow the coalition parties to provide jam in advance of the general election due by March 2016 rather than promises of some to come.

In the heady days of Ireland's Celtic Tiger in 2000, Mary Harney, then tánaiste, remarked that while geographically we Irish were closer to Berlin than Boston, "spiritually we are probably a lot closer to Boston than Berlin" — it was seen as a reflection of the hubris of the time but a decade and a half later Ireland remains as dependent on American international trading jobs provided by firms that leave little value added on the auld sod.

A year after Harney's comment there was a consensus in Ireland in support of the Government's rejection of pleadings from the European Commission and the European Central Bank for public spending restraint.

Crucially, an MRBI opinion poll in the Irish Times showed that more than seven out of ten voters believed the 2001 Budget was good for the country. The poll, the first since the Budget, showed a significant increase in the popularity of the Government and a big rise in satisfaction with the coalition leaders. Some 58% were satisfied with the Government's performance, up 15 points since September 2000.

The EU rules then were unenforceable and alas they remain so. Besides, despite two huge economic busts in a generation, the Augustinian motto 'Lord, make me chaste - but not yet' remains popular with Irish politicians.

Irish Economy: The 2001 economic consensus that paved the road to economic ruin

Irish Boom & Bust: Could conventional wisdom be fooled again?

Harry McGee in The Irish Times today reports: "In a key speech to be delivered in Boston College in the United States tonight Tánaiste Joan Burton will argue that Ireland should be entitled to spend surplus exchequer revenue coming on the back of strong economic growth this year.

She will say the coalition should be allowed spend it on jobs, infrastructure, education and tax cuts rather than have it earmarked for debt reduction, as is required under the strict fiscal rules."

Michael Noonan, finance minister, made similar points last week to Wolfgang Schäuble, Germany's hardline finance minister.

Burton's script says: “We should not be constrained from essential investment by a narrow or rigid interpretation of fiscal rules on the part of the European Commission.”

"If you are giving discretion to six, seven European countries including France, we want discretion as well. But our discretion is in the application of the rules," Noonan told reporters.

"With the present figures, if you do the same sums, you get 1.1, and in the (Commission's economic) spring forecasts out shortly, I assume it will go up again because they have said they expect Ireland to grow by 3.6% (in 2016)," Noonan added.

Reuters says in its latest forecasts, the Commission says Ireland's potential GDP growth in 2015 is 2.7% and in 2016 it is calculated at 3.5%, suggesting more leeway for spending than the numbers quoted by Noonan.

Burton and Noonan may be also preparing for a ruling in coming months from Eurostat, the EU statistics office, that Irish Water will have to be returned to direct State control, which would result in borrowings being added to the public debt.

Chancellor Merkel and Schäuble would likely fear a collapse of the rules if Ireland was given a significant concession.

Deutsche Welle reports that as part of a supplementary 2015 budget to be discussed by the cabinet next Wednesday, the German government plans to increase spending by €4.2bn to €302.6bn this year.

According to details leaked to the press Friday, the increase would include €3.5bn for a special investment fund to support financially weak local communities. A relevant draft makes it clear, though, that Berlin will not give up on its pledge not to take on any fresh debt.

The government, led by Chancellor Angela Merkel, was able to present a federal budget in the black in 2014, a year earlier than originally planned. That was seen as a boon for Berlin, which had preached budget discipline to its Eurozone partners.

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