Recommendation for a COUNCIL RECOMMENDATION on the National Reform Programme 2011 of Irelandand delivering a Council opinionon the updated Stability Programme of Ireland, 2011-2014
Date: 2011-06-07
Institutions: European Commission
Subjects: Ireland, balance of payments assistance, budget deficit, economic policy, employment policy, social rights

EUROPEAN COMMISSION 

Brussels, 7.6.2011 
SEC(2011) 809 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on the National Reform Programme 2011 of Ireland 

and delivering a Council opinion 

on the updated Stability Programme of Ireland, 2011-2014 

{SEC(2011) 716 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on the National Reform Programme 2011 of Ireland 

and delivering a Council opinion 

on the updated Stability Programme of Ireland, 2011-2014 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 121(2) and 148(4) thereof, 

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, and in particular Article 5(3) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

After consulting the Economic and Financial Committee, 

Whereas: 

(1) 

(2) 

On  26  March  2010,  the  European  Council  agreed  to  the  European  Commission's 
proposal  to  launch  a  new  strategy  for  jobs  and  growth,  Europe  2020,  based  on 
enhanced coordination of economic policies, which will focus on the key areas where 
action 
to  boost  Europe’s  potential  for  sustainable  growth  and 
competitiveness. 

is  needed 

On 13 July 2010, the Council adopted a recommendation on the broad guidelines for 
the economic policies of the Member States and the Union (2010 to 2014) and on 21 
October  2010,  adopted  a  decision  on  guidelines  for  the  employment  policies  of  the 
Member States,1 which together form the “integrated guidelines”. Member States were 
invited  to  take  the  integrated  guidelines  into  account  in  their  national  economic  and 
employment policies. 

(3) 

On  7  December  2010,  the  Council  of  the  European  Union  (EU)  adopted  an 
Implementing Decision 2011/77/EU on granting Union financial assistance to Ireland 

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Maintained for 2011 by Council Decision 2011/308/EU of 19 May 2011. 

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for  a  period  of  three  years  under  the  provisions  of  the  Treaty  and  the  Council 
Regulation  (EU)  No  407/2010  of  11  May  2010  establishing  a  European  financial 
stabilisation  mechanism.  The  accompanying  Memorandum  of  Understanding  signed 
on 16 December 2010 and its first update lay down the economic policy conditions on 
the  basis  of  which  the  financial  assistance  is  granted.  The  Council  Implementing 
Decision  was  amended  on  16  May  2011.  The  first  update  of  the  Memorandum  of 
Understanding was signed on 18 May 2011. 

On  12  January  2011,  the  Commission  adopted  the  first  Annual  Growth  Survey, 
marking  the  start  of  a  new  cycle  of  economic  governance  in  the  EU  and  the  first 
European semester of ex-ante and integrated policy coordination, which is anchored in 
the Europe 2020 strategy.  

On  25  March  2011,  the  European  Council  endorsed  the  priorities  for  fiscal 
consolidation  and  structural  reform  (in  line  with  the  Council’s  conclusions  of  15 
February and 7 March 2011 and further to the Commission’s Annual Growth Survey). 
It  underscored  the  need  to  give  priority  to  restoring  sound  budgets  and  fiscal 
sustainability,  reducing  unemployment  through  labour  market  reforms  and  making 
new efforts to enhance growth. It requested Member States to translate these priorities 
into  concrete measures to be included  in their Stability or Convergence Programmes 
and National Reform Programmes. 

On 25 March 2011, the European Council also invited the Member States participating 
in  the  Euro  Plus  Pact  to  present  their  commitments  in  time  to  be  included  in  their 
Stability or Convergence Programmes and their National Reform Programmes.  

On 29 April 2011, Ireland submitted its 2011 Stability Programme update covering the 
period 2011-2015 and its 2011 National Reform Programme. In order to take account 
of their interlinkages, these programmes have been assessed at the same time. 

The  crisis  brought  about  a  major  correction  of  the  large  imbalances  built  during  the 
preceding  boom  years.  Between  2007  and  2010  real  GDP  declined  by  12%  and 
employment  by  nearly  13%,  with  unemployment  increasing  from  4.6%  in  2007  to 
13.7%  in  2010.  It  also  led  to  a  dramatic  deterioration  in  public  finances,  with  the 
general  government  deficit  ratio  reaching  double-digit  levels  in  2008  and  2009.  In 
2010,  the  general  government  deficit  reached  32.4%  of  GDP,  including  financial 
sector support measures of 20.5% of GDP. The debt-to-GDP ratio increased from 25% 
in 2007 to 96% in 2010. 

The  implementation  of  the  EU-IMF  financial  assistance  programme  is  broadly  on 
track. The agreed fiscal measures have been implemented, the 2010 fiscal target was 
met,  and  fiscal  outturns  in  the  first  quarter  of  2011  have  also  been  in  line  with  the 
programme targets. The general government 2011 deficit is forecast to remain below 
the programme ceiling, despite a downward revision in the forecast for nominal GDP 
in 2011. Important progress has been made in reforming the banking system and steps 
have been taken to achieve of the structural reform objectives.  

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

(10)  Based  on  the  assessment  of  the  updated  Stability  Programme  pursuant  to  Council 
Regulation  (EC)  No  1466/97,  the  Council  is  of  the  opinion  that  the  macroeconomic 
scenario  underpinning  the  budgetary  projections  in  the  programme  is  plausible.  The 
medium-term  budgetary  strategy  of  the  programme  is  to  bring  the  headline  general 

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government deficit below the 3% of GDP reference value by the deadline foreseen in 
the Council Recommendation of 3 December 2010. The programme targets deficits of 
10.0% of GDP in 2011, 8.6% in 2012, 7.2% in 2013, 4.7% in 2014 and 2.8% by the 
end  of  the  programme  period  in  2015.  This  path  is  underpinned  by  consolidation 
measures  of  3.75%  of  GDP  implemented  in  the  budget  for  2011,  and  broad 
consolidation  measures  of  5.75%  of  GDP  in  2012-14  and  a  further  unspecified 
consolidation  effort  of  more  than  1%  of  GDP  in  2015.  The  stability  programme 
restates  the  medium-term  objective  (MTO)  for  the  budgetary  position  of  -0.5%  of 
GDP, which is not reached within the programme period. Ireland appears to be at high 
risk with regard to the long-term sustainability of public finances. Achieving sufficient 
primary surpluses over the medium-term and further reforming the Irish social security 
system is necessary to improve the sustainability of public finances.  

(11) 

Ireland  has  made  a  number  of  commitments  under  the  Euro  Plus  Pact,  which  were 
submitted on 3 May 20112. These include concrete measures to foster competitiveness, 
including  reforming  wage-setting  mechanisms,  opening  up  certain  professional 
services  to  competition,  strengthening  research  and  innovation,  reinforce  financial 
stability,  in  particular  crisis  resolution  mechanisms,  and  enhance  public  finance 
sustainability  through  a  medium-term  budget  framework,  reforming  pensions  and 
increasing the retirement age.  

(12)  The  Commission  has  assessed  the  Stability  Programme  and  National  Reform 
Programme, including the Euro Plus Pact commitments.3 It has taken into account not 
only  their  relevance  for  sustainable  fiscal  and  socio-economic  policy  in  Ireland  but 
their conformity with EU rules and guidance, given the need to strengthen the overall 
economic governance of the European Union by providing EU level input into future 
national  decisions.  In  this  context,  the  Commission  stresses  the  urgency  of 
implementing the planned measures to comply with Council Decision 2011/77/EU. 

(13) 

In  light  of  this  assessment,  also  taking  into  account  the  Council  Recommendation 
under Article 126(7) TFEU of 7 December 2010, the Council has examined the 2011 
update of the Stability Programme of Ireland and its opinion4. Taking into account the 
European  Council  conclusions  of  25  March  2011,  the  Council  has  examined  the 
National Reform Programme of Ireland, 

HEREBY RECOMMENDS that Ireland should : 

implement  the  measures  as  laid  down  in  Implementing  Decision  2011/77/EU  on  granting 
Union financial  assistance  to Ireland, as amended by Decision of  16  May  2011,  and further 
specified  in  the  Memorandum  of  Understanding  of  16  December  2010  and  its  update  of  18 
May 2011. 

Done at Brussels, 

For the Council 
The President 

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More details on the commitments made under the Euro Plus Pact can be found in SEC(2011) 716. 
SEC(2011) 716. 
Foreseen in Article 5(3) of Council Regulation (EC) No 1466/97. 

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