FINE GAEL has indicated ahead of its meeting with European Commission president José Manuel Barroso that it would be willing to introduce German-style budget rules if it would lead to a lower interest rate on Ireland’s €65 billion rescue package.
The party, which expects to be in government within weeks, is “seriously considering” drawing up an amendment that, if adopted, would enshrine a “debt brake” clause in the Constitution, senior party sources have said.
Party leader Enda Kenny and Finance spokesman Michael Noonan will meet Mr Barroso later today, and will raise the reopening of the terms of the loans from the International Monetary Fund and the EU.
A debt brake clause would constitutionally bar budget deficits above a certain threshold. It would place considerable additional pressure on Governments to cut spending and/or raise taxes if the stability of the public finances appeared to be at risk.
The idea has been broached in the context of Fine Gael’s stated objective of renegotiating the EU-IMF bailout if the party returns to power.
German chancellor Angela Merkel hinted this week that countries introducing such constitutional clauses, as Germany has done recently, could receive more favourable lending terms from the euro zone’s bailout mechanisms.
“Michael Noonan and I welcome this opportunity to meet the president of the European Commission. Fine Gael in government is committed to changing the policy measures contained in the EU/ECB/IMF funding programme and to negotiating with our European partners to reduce the penal interest rate that Ireland is being charged. We look forward to discussing these and other issues with President Barroso,” Mr Kenny said.
The Brussels meeting arose out of ongoing contacts between Fine Gael and the European Commission. The party said its representatives had already met commissioner Olli Rehn.
Fine Gael also said yesterday that if elected, it is fully committed to delivering a surplus of revenues over day-to-day spending by 2016.
Under the current Government’s projections, there will be a shortfall between current revenue and expenditure in 2014, the last year for which figures have been published.
The Fine Gael proposals may therefore require continued budgetary tighening in 2015 and 2016.
A senior member of the European Central Bank appeared last night to narrow the scope for any new government to seek changes to the terms of the bailout. Lorenzo Bini Smaghi told RTÉ’s Primetime programme that changing the terms would be “unfair to other countries”.
Mr Bini Smaghi, one of six members of the ECB’s executive board, also questioned the sustainability of Ireland’s comparatively low rate of corporation tax.
“I think it’s right that Ireland should choose its own tax system but then it has to have the ability to stand by it when things go wrong,” he said.
In an interview with The Irish Timesearlier in January, Mr Bini Smaghi rejected any suggestion that the ECB was partially culpable for the Irish property and banking crashes, saying the fault for the debacle rested with Ireland alone. Last week, Mr Barroso echoed these views when speaking before the European Parliament.