Brussels, 29/10/2001 (Agence Europe) - As reported in EUROPE of 24 October, p.7, the European Commission adopted a report last Tuesday on economic and budgetary changes in Ireland in 2001, mentioning the effort the country had made to come into line with the Broad Economic Policy Guidelines (BEPG) for 2001. The Commission believes that the implementation of the 2001 budget meets the concerns expressed by the ECOFIN Council in February 2001, but the budget results expected for 2002 and the announced commitments could not completely head off the danger of a rapid fall in the budget surplus in 2002. The report calls for Ireland's budgetary policy for 2002 to focus on stability. The report will be discussed by the ECOFIN Council on 6 November.
The Commission stresses that the implementation of the 2001 budget in Ireland occurred smoothly and that the tax-relief given on the savings scheme and the new system for covering the tax introduced following the EU Council's recommendations had somewhat relieved pressure from short-term demand. The data available concerning the implementation of the 2001 budget show a sharp fall in income by at least 1.5% of GDP. Leaving aside income from the sale of UMTS licences, the Commission is predicting a budget surplus of less than 2.75% of GDP this year, compared with 4.5% in 2000.
The Irish economy is now expected to grow by 6% in 2001, at least two points less than predicted in the updated convergence programme unveiled by Dublin in December 2000. After a record period of growth, the most recent available data shows that the Irish economic will have to cope with a sharp slowdown in 2001 and the Commission is highlighting the uncertainties expressed in the 2002 forecasts, adding that the Irish economy will have to face a number of external blows - the repercussions of the agricultural crises (particularly foot and mouth) and the impact of the US economy, accentuated by the 11 September attacks.
The Commission warned that inflation is still quite high in Ireland, but that the economic slowdown should help reduce it. Basically, however, the report states that overheating still exists, which therefore justifies continuing to monitor changes to Ireland's budgetary policy.