The European Commission said today that Ireland's public finances are in line with the rules of the Stability and Growth Pact and noted the Government had taken heed of EU concerns on expansionary budgets.
In its latest assessment of member countries' progress towards the goal of balanced budgets, the Commission said Ireland's budgetary position when adjusted for the business cycle is well within EU guidelines.
Ireland's low debt-to-GNP ratio which is the EU's second-lowest also gave comfort to EU policy makers.
Ireland is projected to run a nominal deficit of 0.7 per cent of GDP in 2003, rising to 1.2 per cent in 2004 and 2005. But the "cyclically adjusted deficit" - a measure that smoothes out the effects of short term factors such as recessions - declined by almost 0.5 per cent in 2003 indicating a tightening of fiscal policy, the Commission said.
Last year Ireland became the first EU member-state to receive an "official recommendation" criticising its economic policies after a number of expansionary budgets.
The Commission now expects the cyclically adjusted deficit to remain at around 0.5 per cent of GDP after 2005.
The Commission concludes its assessment of Ireland by saying "we consider that such a small cyclically adjusted deficit is consistent with the Stability and Growth Pact".
EU Economic Affairs Commissioner Mr Pedro Solbes today described the EU's golden rule that requires euro zone countries to keep budget deficits below 3 per cent of GDP as "untouchable". Last year, Commission President Dr Romano Prodi called the rigid budgetary requirements as "stupid".