CONCERNS about the impact on the economy of the cutback in EU funds after 1999 have been overdone, according to a review by Davy stockbrokers.
Net EU transfers to Ireland have been falling as a percentage of Gross National Product for some years without any negative impact on growth, according to Davy's. They fell from 6.6 per cent of GNP in 1991-93 to 4.3 per cent in 1994-96. Also, the funds will not completely dry up after 1999.
The scale and impact of EU transfers "is not as great as commonly supposed", according to Davy's economist, Mr Oliver Mangan. Currently they amount to 2.5 per cent of GNP. A study by the ESRI and DKM consultants in 1993 estimated that structural funds contributed 0.7 per cent a year to economic growth in the period 1989 to 1993, "not hugely significant in an economy with a trend growth rate of almost 5 per cent".
In most cases, the EU structural funds have been used to increase investment and labour skills which should help boost the economy's long term output, according to Davy's.
Much has been made of the fact that Ireland's national income per capita now exceeds the 75 per cent threshold for eligibility for the structural funds. However, a higher 90 per cent threshold applies to cohesion funds and the 75 per cent requirement may be altered.
Also, structural funds could be applied at a regional level after 1999, meaning some parts of the State would still qualify.
Alter 1999, Ireland would continue to receive substantial transfers from the EU structural funds and the Common Agricultural Policy, it said.
