Reality of compact targets questioned

OIREACHTAS COMMITTEE: EU AFFAIRS:THE STRUCTURAL deficit targets included in the fiscal compact would not have prevented the imbalances that occurred during the economic boom, an Oireachtas committee was told yesterday.

Marie Sherlock, economic adviser to the union Siptu, told the Oireachtas Committee on European Union Affairs yesterday that structural deficits were not easy to measure.

The fiscal compact, on which Ireland will vote this year, aims to place financial limits on how much a government can borrow in proportion to its revenue. It states any deficit must not exceed 0.5 per cent of gross domestic product.

Siptu is yet to take a public stance on whether it will be supporting the treaty.

Ms Sherlock, who stressed she was not speaking for Siptu but as its economic adviser, said the 0.5 per cent rule would only have been breached three times from 2000 to 2008 and would not have prevented imbalances in the boom.

Fr Seán Healy of Social Justice Ireland also questioned the reality of the 0.5 per cent target. The fiscal treaty was developed on a “flawed” analysis and should be renegotiated, although he acknowledged this was not going to happen. The US recovered from the Great Depression through investment rather than austerity.

James Doorley, assistant director of the National Youth Council, raised concerns about whether the treaty might prevent investment in youth employment given the deficit constraints.

Prof Gerry Boyle, director of Teagasc, highlighted the importance of the treaty to investment in agriculture.

Senator Terry Leyden warned of the serious responsibility Siptu would have if it recommended a No vote to its members.

Senator Fidelma Healy Eames said the tone of Ms Sherlock’s and Mr Doorley’s presentations was disappointing and “close to scaremongering”.