DUBLIN (Reuters) - One-size-fits-all European Union fiscal rules are constraining badly needed infrastructure investment in Ireland and creating an increasing problem for the bloc’s fastest growing economy, its finance minister said on Friday.
Michael Noonan asked his euro zone counterparts on Monday to grant Ireland flexibility within the rules to ramp up capital spending, which ground to a halt during the financial crisis in a country which also has the EU’s fastest growing population.
But they rejected a European Commission proposal to loosen budget policy for the 19-country bloc next year with a guideline of an expansion up to 0.5 percent of gross domestic product.
“This country needs a huge investment in infrastructure (because) we’ve one big problem. By 2050, a generation away, the estimate is that the Irish population will be 6.7 million people as against 4.6 (million) now,” Noonan said in a speech on Friday.
“At the moment we’re constrained unduly by the necessity to fit within a set of fiscal rules where the same rules apply to every country in Europe regardless of his state of development or whether its population is increasing or decreasing.”
Ministers on Monday instead agreed that Germany, the Netherlands and Luxembourg, the EU countries with the highest budget surpluses, should spend more. Ireland will only balance its budget by 2018 but it has cut it from a deficit of over 14 percent in 2009.
Noonan, who was speaking at the opening of the European Investment Bank’s (EIB) first permanent office in Ireland, said Dublin also needed to devise more ways to keep some expenditure off its balance sheet.
Noonan’s department is in discussions with Eurostat, the EU’s statistics office, to clarify whether projects developed through public-private partnerships, generally used to keep capital investment off the state’s balance sheet, can remain so.
The EIB, the EU’s financial arm which has become a key vehicle for such investments in Ireland, has provided 900 million euros ($950 million) to the Irish economy this year and expects to provide 1 billion in 2017 - an “enormous” amount considering the size of the country, its president Werner Hoyer said.
editing by John Stonestreet