The Minister for Finance, Mr McCreevy, and the Tánaiste, Ms Harney, have reaffirmed the Government's view that the Stability and Growth Pact should be interpreted in a more flexible way to allow countries with low public debt to borrow more, writes Denis Staunton from Brussels.
Ms Harney said that Ireland's economic success would not have been possible if the pact had been applied in its current form for the past 25 years.
"I want to see it interpreted in a much different way. It's a stability pact, which is essential to have fiscal stability in the euro zone. But it's also a growth pact and sometimes the two elements are not being given equal weight.
"For example, we need more money at the moment to invest in infrastructure. The manner in which it is currently interpreted prevents us doing that. And if this pact had operated on this basis over the past 25 years, Ireland would not be the economic success it is today. We wouldn't have been able to do a lot of the things we have done," she said.
Mr McCreevy acknowledged that it would be difficult to find agreement among EU finance ministers to change the pact's interpretation. But with Germany, France and Portugal already in breach of the rules, he predicted that the pact's credibility could soon come into question.
"I think we will be in an interesting situation later in the year and maybe into next year because if it's obvious that a lot of other countries are not close to balance or in surplus, there will be a credibility issue there," he said.
Mr McCreevy insisted that, despite the pact's rules, the Government was borrowing extensively to fund essential infrastructure projects but he ruled out borrowing for current expenditure, including the health service.
"We'll be borrowing in 2003, 2004 and 2005 and all of that is being spent on infrastructure. So it's not that we're not borrowing. We're going to borrow 0.8 per cent of GDP this year in EU terms, something like 1.3 per cent in EU terms in 2004 and something similar the following year," he said.
Mr McCreevy was relaxed about the euro's sharp rise against the dollar, although he warned that some Irish companies had failed to take advantage of the low exchange rate that prevailed over the past few years by trimming "fat" from their operations.
He declined to speculate on the likelihood of an interest rate cut next month but suggested that recent changes to the European Central Bank's monetary policy strategy could make such a move easier.
"I assume that they want to give themselves some flexibility in what they can do. That's the way I would interpret it," he said.
Euro-zone finance ministers discussed interest rates with ECB officials over dinner on Monday evening and the French finance minister, Mr Francis Mer, indicated that a move could be imminent.
