European Semester Spring Package Gives Positive Assessment of Ireland’s Economic Progress

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European Semester Spring Package Gives Positive Assessment of Ireland’s Economic Progress

On Tuesday 24th May the Minister for Finance, Paschal Donohoe will attend the Economic and Financial Affairs Council (ECOFIN), which will take place in Brussels.

At ECOFIN, European Finance and Economic Ministers will have an exchange of views on the 2022 European Semester package which was published on Monday 23rd May.

The 2022 European Semester has returned to a more normal footing following the substantial modification of the 2021 cycle to accommodate the implementation of the Recovery and Resilience Facility (RRF). For 2022, the Commission has published Country Reports and a full suite of updated Country Specific Recommendations (CSRs) for each Member State. The Package also includes In Depth Reviews (IDRs) under the Macroeconomic Imbalances Procedure for several countries, including Ireland.

Significantly, for the 2022 European Semester, Ireland has not been selected as a country that will be subject to an In-Depth Review (IDR) under the Macroeconomic Imbalance Procedure (MIP). The Commission have noted the important progress made by the Irish Government in reducing both Government and private indebtedness, as well as net external liabilities. This is the first time since 2014 that Ireland has not Ireland has been assessed as part of the Semester process as not experiencing a macroeconomic imbalance.

Speaking in advance of his attendance, the Minister said:

I welcome the publication of the European Semester package and the European Commission’s recognition of the responsible economic governance and sound progress we have made in Ireland, taking into account the significant challenges presented by Covid-19 and now the war in Ukraine.

Since 2014, and before that under enhanced surveillance following the financial crisis, Ireland has been subject to in-depth-reviews due to macroeconomic imbalances. This year, for the first time in many years, Ireland is no longer experiencing macroeconomic imbalances. Ireland’s debt ratio has declined significantly over the years and continue to display strong downward dynamic”.

The Commission has proposed the following Country Specific Recommendations for Ireland:

  • In 2023, ensure that the growth of nationally-financed current expenditure is in line with an overall neutral policy stance, taking into account continued temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. Stand ready to adjust current spending to the evolving situation. Expand public investment for the green and digital transition and for energy security, including by making use of the RRF, RePowerEU and other EU funds. For the period beyond 2023, pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions. Address the expected increase in age-related pension expenditure by ensuring the fiscal sustainability of the state pension system.
  • Proceed with the implementation of its recovery and resilience plan, in line with the milestones and targets included in the Council Implementing Decision of 8 September 2021. Submit the 2021-2027 cohesion policy programming documents with a view to finalising their negotiations with the Commission and subsequently starting their implementation.
  • Focus efforts on boosting the circular economy. In particular, develop both infrastructure and policies to prevent waste and increase reused and recycled content, and develop a more effective system for the separate collection of recyclable waste, including biodegradable waste. Promote safer and cleaner waste water circuits.
  • Reduce overall reliance on fossil fuels. Accelerate the deployment of renewable energy, in particular offshore wind, including by introducing reforms to improve the efficiency of the planning and permit system, particularly by reducing the duration of procedures. Upgrade energy infrastructure, including for storage. Ensure the fast implementation of deep building retrofits.

The Country Specific Recommendations will now be negotiated and agreed through the ECOFIN preparatory committees, with a view to discussion at the June Ecofin and approval by Leaders at an upcoming European Council. The Country Specific Recommendations will be formally adopted by the ECOFIN Council in July.

The European Commission's 2022 European Semester Spring Package provides Member States with support and guidance two years on from the first impact of the COVID-19 pandemic and in the midst of Russia's ongoing invasion of Ukraine.

The Spring 2022 Economic Forecast projects the EU economy to continue growing in 2022 and 2023. However, while the EU economy continues to show resilience, Russia's war of aggression against Ukraine has created a new environment, exacerbating pre-existing headwinds to growth, which were previously expected to subside. It also poses additional challenges to the EU economies related to security of energy supply and fossil fuel dependency on Russia.

The Commission have now invited the Eurogroup and the Economic and Financial Affairs Council (ECOFIN) to discuss the package and endorse the guidance offered today. It looks forward to engaging in a constructive dialogue with the European Parliament on the contents of this package and each subsequent step in the European Semester cycle.

Article Published: 25/05/2022