52000AG0302(02)

COUNCIL OPINION

of 31 January 2000

on the updated stability programme of Ireland 2000 to 2002

(2000/C 60/02)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies(1), an in particular Article 5(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

On 31 January 2000, the Countil examined Ireland's updated stability programme, which covers the period 2000 to 2002(2).

The Council welcomes the record of implementation of the programme in 1999. The Irish economy continued to expand rapidly, with real GDP rising by 8,4 % and employment increasing by about 4,75 %. In the context of this very favourable economic performance, the projections made for the improvement in the budgetary situation were exceeded by a significant margin. The Council notes with satisfaction that the Irish general Government balance remained in substantial surplus in 1999 and that there was another sharp decline in the government debt/GDP ratio.

Ireland already fulfilled its obligations under the stability and Growth Pact in 1999. This will continue to be the case in the period 2000 to 2002. The Council notes that the projected surplus on the general Government balance, even after taking account of significant pre-funding of state pension liabilities, is clearly sufficient in each year to provide a safety margin against breaching the 3 % of GDP reference value of the Treaty in the event of normal cyclical fluctuations. The Council notes also that the Government debt/GDP ratio will decline steadily over the programme period.

The Council considers the macroeconomic scenario presented in the updated stability programme to be realistic. However, the economy is now at an advanced stage of the cycle and there is a need to use available domestic policy instruments to address the risk of inflation pressures. In this context, the Council recalls the recommendations to Ireland provided in the 1999 Broad Economic Policy Guidelines and urges the national authorities to be ready to use budgetary policy to ensure economic stability. Given the extent of overheating in the economy, the Council considers such action to be warranted in implementing the budget for 2000 and in planning beyond, while acknowledging the supply side objectives of Ireland's medium-term budgetary strategy.

The Council welcomes the fact that the updated programme addresses the issue of structural reforms. In particular, the publication of the National Development Plan 2000 to 2006 responds to the suggestion of the Council for a detailed plan to meet the physical and human capital needs of the still rapidly expanding economy, while taking account of an expected reduction in transfers from the Structural Funds.

(1) OJ L 209, 2.8.1997, S. 1.

(2) The stability programme for Ireland 1999-2001 was the subject of a Council opinion of 18 January 1999 (OJ C 42, 17.2.1999, p. 4).