Ibec, the group that represents Irish business, has today said that the latest European Commission report on the Irish economy and public finances fails to appreciate the full substance of the economy and the scale of infrastructure deficits facing the country.
Commenting on the European Commission country specific recommendations for Ireland in the latest European Semester report, Ibec Director of Policy and Public Affairs Fergal O'Brien stated: "The single largest constraint facing Ireland's growth prospects at present is the chronic level of under-investment in infrastructure. While the European Commission identifies this constraint, it fails to apply its own fiscal rules in a manner which would support increased capital spending. Its assessment completely excludes the recorded 2015 GDP growth rate of 26%, in order to limit future allowable public spending growth, and is therefore inconsistent with its own methodology for estimating Member States' fiscal space. The cost of this in terms of reduced fiscal space for the Government could be in the order of €7 billion over the years 2018 to 2021. A more accurate assessment of the economy would be to support Government use of the windfall corporation tax receipts, which continue to flow from the GDP increase, for much needed one-off public capital projects.
"Government debt has dropped rapidly and the priority now for the public finances must be to balance the need for debt sustainability with the urgent requirement for more capital spending. Before a new Taoiseach takes office, it is important that a robust debate occurs on both the constraints that Ireland faces from the external fiscal rules and a Government policy of chasing a debt to GDP target of 45%, which is well below the EU requirement of 60%. This debate is central to addressing the quality of life and growth constraint challenges which the country now faces."