Recommendation for a COUNCIL RECOMMENDATION on Ireland’s 2012 national reform programme and delivering a Council opinion on Ireland’s stability programme for 2012-2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Community loan, EU aid, Ireland, economic stabilisation, financial aid, macroeconomics, reflation

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
COM(2012) 316 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on Ireland’s 2012 national reform programme  

and delivering a Council opinion on Ireland’s stability programme for 2012-2015 

{SWD(2012) 316 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on Ireland’s 2012 national reform programme  

and delivering a Council opinion on Ireland’s stability programme for 2012-2015 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 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 
policies1, and in particular Article 5(2) thereof, 

Having regard to the recommendation of the European Commission2, 
Having regard to the resolutions of the European Parliament,3  

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 States4, which together form the ‘integrated guidelines’. Member States were 
invited  to  take  the  integrated  guidelines  into  account  in  their  national  economic  and 
employment policies. 

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4 

OJ L 209, 02.08.1997, p. 1 
COM(2012)316 final 
P7_TA(2012)0048 and P7_TA(2012)0047 
Council Decision 2012/238/EU of 26 April 2012 

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(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

On 12 July 2011, the Council adopted a recommendation on Ireland’s national reform 
programme  for  2011  and  delivered  a  Council  opinion  on  Ireland’s  updated  stability 
programme for 2011-2014. 

On 23 November 2011, the Commission adopted the second Annual Growth Survey, 
marking  the  start  of  the  second  European  Semester  of  ex-ante  and  integrated  policy 
coordination, which is anchored in the Europe 2020 strategy. 

On 2 March 2012, the European Council endorsed the priorities for ensuring financial 
stability,  fiscal  consolidation  and  action  to  foster  growth.  It  underscored  the  need  to 
pursue  differentiated,  growth-friendly  fiscal  consolidation,  to  restore  normal  lending 
conditions  to  the  economy,  to  promote  growth  and  competitiveness,  to  tackle 
unemployment  and  the  social  consequences  of  the  crisis,  and  to  modernise  public 
administration.  

On 2 March 2012, the European Council also invited the Member States participating 
in  the  Euro  Plus  Pact  to  present  their  commitments  in  time  for  inclusion  in  their 
stability or convergence programmes and their national reform programmes. 

On 27 April 2012, Ireland submitted its stability programme covering the period 2012-
2015 and, its 2012 national reform programme.  

On  7  December  2010,  the  Council  adopted  Implementing  Decision  2011/77/EU 
granting  financial  assistance  to  Ireland  until  end  2013  in  accordance  with  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 successive supplements lay down the economic policy 
conditions on the basis of which the financial assistance is disbursed. 

Overall, Ireland has implemented the conditions of the financial assistance programme 
specified in the Memorandum of Understanding. In particular, the fiscal deficit target 
for  2011  (10.6 %)  was  achieved  by  a  significant  margin  and  the  budget  for  2012 
targets a fiscal deficit of 8.6 % of GDP, in line with the programme ceiling. Medium-
term  fiscal  consolidation  plans  are  consistent  with  the  programme’s  deficit  ceilings 
and  a  deficit  below  3 %  of  GDP  by  2015.  The  recapitalisation  of  domestic  banks 
envisaged by the 2011 Prudential Capital Assessment Review of the Central Bank of 
Ireland has been substantively completed and domestic banks’ deleveraging exceeded 
the  programme’s  targets  for  2011  as  a  whole.  Structural  reforms  to  enhance 
competitiveness and allow stronger job creation are significantly advanced. 

(10) 

Ireland’s  economy  returned  to  modest  growth  of  0.7 %  in  2011,  broadly  as  expected 
under  the  programme.  Growth  was  export-led,  benefiting  from  competitiveness 
improvements  and  solid  external  demand.  Net  exports  contributed  4.7  pps  to  GDP 
growth,  while  domestic  demand  continued  to  contract  due  to  fiscal  consolidation, 
falling  employment  and  household  balance  sheet  repair.  In  2012,  growth  is  set  to 
moderate to about 0.5 %, due to the adverse external environment and the continuing 
adjustment  of  domestic  demand.  Household  and  corporate  balance  sheet  repair  will 
continue to weigh on consumption and investment in the medium term. Export-driven 
growth is expected to pick up, increasing to 1.9 % in 2013 and to 2.8 % by 2015 on the 
back  of  Ireland’s  strong  demographics  and  flexible  labour  market  as  well  as 
considerable spare capacity in the economy. 

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(11)  Based  on  the  assessment  of  the  stability  programme  pursuant  to  Article  5(1)  of 
Council  Regulation  (EC)  No  1466/97,  the  Council  is  of  the  opinion  that the 
macroeconomic scenario underpinning the budgetary projections of the programme is 
plausible.  Economic  growth  projections  in  the  programme  are  similar  to  the 
Commission's  spring  2012  forecast.  The  objective  of  the  budgetary  strategy  of  the 
programme  is  to  reduce  the  general  government  deficit  below  the  3%  of  GDP 
threshold  by  end  2015,  which  is  in  line  with  the  deadline  set  by  the  Council  for 
correcting  the  excessive  deficit.  The  programme  targets  deficits  of  8.3%  of  GDP  in 
2012, 7.5% of GDP in 2013, 4.8% of GDP in 2014 and 2.8% of GDP by the end of the 
programme  period  in  2015.  This  path  is  underpinned  by  consolidation  measures  of 
2.7% of GDP implemented in the budget for 2012, and broad consolidation measures 
of  3.9  %  of  GDP  in  2013-2014  and  a  further  partly  specified  consolidation  effort  of 
1.1% of GDP in 2015. The programme restates the medium-term objective (MTO) of 
a structural general government deficit of 0.5 % of GDP, which is not reached within 
the programme period. The MTO adequately reflects the requirement of the Stability 
and Growth Pact. General government debt is above 60% of GDP and is projected to 
increase from 108% of GDP in 2011 to 120% in 2013 before starting to decline. For 
the duration of the Excessive Deficit Procedure until 2015 and in the following three 
years,  Ireland  will  be  in  transition  period  and  the  budgetary  plans  would  ensure 
sufficient  progress  towards  compliance  with  the  debt  reduction  benchmark  of  the 
Stability and Growth Pact. According to the Commission's latest assessment, the risks 
with regards to long-term sustainability of public finances appear to be high.  

(12) 

Ireland  has  made  a  number  of  commitments  under  the  Euro  Plus  Pact.  These 
commitments  relate  to  fostering  competitiveness,  fostering  employment,  enhancing 
sustainability of public finances and reinforcing financial stability.  

HEREBY RECOMMENDS that Ireland should take action within the period 2012-2013 to: 

Implement  the  measures  laid  down  in  Implementing  Decision  2011/77/EU  and  further 
specified  in  the  Memorandum  of  Understanding  of  16  December  2010  and  its  subsequent 
supplements. 

Done at Brussels,  

For the Council 
The President 

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