THE GOVERNMENT has said that it has "no room for manoeuvre" on the European Commission's €200 billion economic recovery plan, which was released last week.
A spokesman for Minister for Finance Brian Lenihan, who is in Brussels for a series of key meetings with his European counterparts, said that although the Government welcomed the plan, the feeling in Ireland was that enough was already being done. "Next year's general Government deficit is budgeted to be 6.5 per cent, which in itself is a substantial fiscal stimulus," he said. "The priority for countries like Ireland, with relatively high general government deficits, is to get our public finances back in order, and this is acknowledged in the Commission recovery plan."
With an expected 5.5 per cent budget deficit for 2008, Ireland is currently in breach of EU budget rules, which stipulate that government deficits must not exceed 3 per cent of GDP in a given year. The Department of Finance says getting the deficit below this 3 per cent ceiling must remain the focus for Ireland and that the Commission is allowing time for the budgetary strategy to take effect.
The Government said that its relatively low tax rates for the employed and the fact that it was dedicating 5 per cent of GNP - twice the EU average - to capital investment were "broadly consistent" with the measures proposed by the Commission.
Mr Lenihan was in Brussels for a meeting of the Eurogroup - the 15 countries using the euro plus the European Central Bank - to discuss a general line to take on the Commission's package, which divided member-states after its release last Wednesday.
The plan encourages EU countries to expand their budgets by about 1.2 per cent of GDP - amounting to €170 billion across the bloc. An additional €30 billion is to come from EU coffers, provided that the money is earmarked for immediate actions to boost consumer demand and investment.
However, Germany has rejected calls to step up government spending, pitting the country's chancellor, Angela Merkel - who said on Monday that Germany would not go on a spending spree to appease its neighbours - against French president Nicolas Sarkozy, who has criticised her lukewarm reaction to the plan.
Dr Merkel said Germany would keep its "options open" on how to tackle the looming European recession but reiterated her aversion to "senseless" economic stimulus programmes. Facing its worst recession in decades, Berlin has dismissed calls for British-style VAT cuts or large-scale industry investment programmes along French lines.
Instead, Dr Merkel's government has decided on a wait-and-see approach, promising to review the situation in January. "Germany will keep its options open to fight effectively the effects of the crisis. And I mean all options," Dr Merkel said yesterday. She said it was irresponsible to agree hasty multi-billion-euro programmes that give the impression of action without any guarantee of success.
The Eurogroup meeting will be followed by a larger summit of the EU's 27 finance ministers today.
