Chambers Ireland welcomes EU’s positive fiscal stance

euro-1557431_1920The European Commission has confirmed the need to move towards a more positive fiscal stance for the euro area. The signal was made as part of the Commission’s views on the EU’s economic and social priorities for the year ahead, building on the guidance from President Jean-Claude Juncker’s 2016 State of the Union address and on the latest economic data from the Commission’s Autumn 2016 Forecast.

Commenting on the commencement of the 2017 European Semester, Ian Talbot, Chief Executive, Chambers Ireland said: “This important change of stance by the Junker Commission points to a recognition that the European Union, and the eurozone in particular, is at risk of suffering from structural low economic growth and almost zero inflation. The utility of European monetary policy has been all but exhausted by the efforts undertaken by the ECB since the financial crisis, so a new strategy was a necessity.

“This intervention will encourage a fiscal policy more conducive to stimulating investment and demand throughout Europe. The move will also go some way towards compensating for the reality that some member states within the eurozone consistently run high surpluses while others remain in deficit.”

Talbot added that for Ireland, this change in fiscal stance does not necessarily mean that the Government is in a position to expand our public spending or investment in the immediate term but that there will be indirect benefits as other member states are encouraged to ramp up public investment which will stimulate economic activity and demand.

“If Ireland continues to adhere to its obligations under the Stability and Growth Pact and can continue to demonstrate the capacity to manage our deficit, there may be an opportunity to expand public spending in the near term. However, we believe that this option, should it become available, should only be utilised for important national infrastructure projects, and comes with the caveat that any additional public spending by Ireland will always need to be repaid at some point in the future.

It remains to be seen whether the Commission’s ambitions can be realised, as it will require the eurozone member states working collectively and cooperatively on fiscal policy. Strong leadership will be required to make this happen.”