Recommendation for a COUNCIL DECISION abrogating Decision 2009/416/EC on the existence of an excessive deficit in Ireland
Date: 2016-05-18
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Ireland, budget deficit, budget policy, gross domestic product, public debt, public expenditure, public finance, stability pact

   EUROPEAN COMMISSION  Brussels, 18.5.2016  COM(2016) 297 final   Recommendation for a COUNCIL DECISION abrogating Decision 2009/416/EC on the existence of an excessive deficit in Ireland  
 
 
Recommendation for a 

COUNCIL DECISION 

abrogating Decision 2009/416/EC on the existence of an excessive deficit in Ireland 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 126(12) thereof, 

Having regard to the recommendation from the Commission, 

Whereas:  

(1) 

(2) 

(3) 

(4) 

1 
2 

3 

On  27  April  2009,  following  a  recommendation  from  the  Commission,  the  Council 
decided,  by  Decision  2009/416/EC1  in  accordance  with  Article  104(6)  of  the  Treaty 
establishing the European Community, that an excessive deficit existed in Ireland. The 
Council noted that the general government deficit reached 6.3% of GDP in 2008, thus 
above the 3 % of GDP Treaty reference value and it was estimated to widen to 11% of 
GDP in 2009. The general government gross debt was projected to breach the 60 % of 
GDP Treaty reference value in 2009.  

On the same date, in accordance with Article 104(7) of the Treaty and Article 3(4) of 
Council Regulation (EC) No 1467/97, the Council, based on a recommendation from 
the  Commission,  issued  a  recommendation  to  Ireland  to  correct  the  excessive  deficit 
by 2013 at the latest. That Council recommendation was made public. 

On  2  December  2009,  the  Council  concluded  that  the  Irish  authorities  had  taken 
effective  action  in  compliance  with  the  Council  recommendations  of  27  April  2009, 
but  that unexpected adverse  economic events with  major  unfavourable  consequences 
for  government  finances  could  be  considered  to  have  occurred  in  Ireland  after  the 
adoption  of  the  original  recommendation.  Therefore,  the  Council,  following  a 
recommendation  from  the  Commission,  considered  that  the  conditions  envisaged  in 
Article  3(5)  of  Regulation  (EC)  No  1467/97  were  fulfilled  and  issued  a  new 
Recommendation to Ireland under Article 126(7) of the Treaty with a view to bringing 
the excessive deficit situation to an end by 20142. 

On  7  December  2010,  the  Council  considered  that  unexpected  adverse  economic 
events with major unfavourable consequences for government finances, notably with 
reference  to  the  substantial  banking  sector  support  measures  that  had  to  be 
implemented,  had  occurred 
the  Council  following  a 
in  Ireland.  Therefore, 
recommendation  from  the  Commission,  issues  a  new  Recommendation  to  Ireland 
under  Article  126(7)  of  the  Treaty,  setting  a  2015  deadline  for  the  correction  of  the 
excessive deficit3. At the same time, following the request by the Irish authorities for 

Council Decision 2009/416/EC of 27 April 2009 on the existence of an excessive deficit in Ireland. 
Council  Recommendation  of  2  December  2009  with  a  view  to  bringing  to  an  end  the  situation  of  an 
excessive deficit in Ireland. 
Council  Recommendation  of  7  December  2010  with  a  view  to  bringing  to  an  end  the  situation  of  an 
excessive deficit in Ireland. 

 
 
 
 
                                                 
financial  assistance  from  the  European  Union,  the  Member  States  whose  currency  is 
the euro and the International Monetary Fund (IMF), the Council addressed a decision 
to Ireland on granting financial assistance and on specific measures to restore financial 
stability  and  sustainable  growth4.  The  Memorandum  of  Understanding  on  Specific 
Economic  Policy  Conditionality  (the "Memorandum of  Understanding") between the 
Commission and the Irish authorities was signed on 16 December 2010. 

On 24 August 2011, the Commission concluded that Ireland had taken effective action 
towards correcting the excessive deficit by 2015 as recommended by the Council on 7 
December 20105. 

In  line  with  Article  10(2),  letter  (a),  of  Regulation  (EU)  No  472/2013,  Ireland  was 
exempted from a separate reporting under the excessive deficit procedure and reported 
in the framework of its financial assistance programme. 

In  December  2013,  Ireland  successfully  completed  the  EU-IMF  financial  assistance 
programme, with the vast majority of policy conditions under the programme met and 
investor confidence in the sovereign and the banking sector restored. 

In  accordance  with  Article  4  of  the  Protocol  on  the  excessive  deficit  procedure 
annexed to the Treaties, the Commission provides the data for the implementation of 
the procedure. As part of the application of this Protocol, Member States are to notify 
data  on  government  deficits  and  debt  and  other  associated  variables  twice  a  year, 
namely before 1 April and before 1 October, in accordance with Article 3 of Council 
Regulation (EC) No 479/20096. 

The  Council  should  take  a  decision  to  abrogate  a  decision  on  the  existence  of  an 
excessive deficit on the basis of notified data. Moreover, a decision on the existence of 
an excessive deficit should be abrogated only if (i) the Commission forecasts indicate 
that the deficit will not exceed the 3% of GDP threshold over the forecast horizon7. 

(5) 

(6) 

(7) 

(8) 

(9) 

(10)  Based on data provided by the Commission (Eurostat) in accordance with Article 14 
of Regulation (EC) No 479/2009, following the April 2016 notification by Ireland, the 
2016  Stability  Programme  and  the  Commission  2016  spring  forecast,  the  following 
conclusions are justified: 

– 

Since  2009,  when  the  deficit  peaked  at  around  11.5%  of  GDP  (excluding 
deficit-increasing  one-off  measures  related  to  financial  sector  support),  the 
general government balance has steadily improved, with the deficit declining to 
3.8% of GDP in 2014 and to 2.3% of GDP in 2015 (1.3% of GDP if a one-off 
transaction  is  excluded8).  Overall,  the  deficit  reduction  was  mainly  driven  by 
expenditure restraint, with the weight of current primary expenditure as a share 

4 
5 

6 

7 

8 

Council Implementing Decision of 7 December 2010 on granting Union financial assistance to Ireland. 
Communication from the Commission to the Council on the assessment of the action taken by Ireland 
in response to the Council Recommendation of 7 December 2010 with a view to bringing an end to the 
situation of excessive government deficit - COM(2011) 509 final, 24.8.2011. 
Council  Regulation  (EC)  No  479/2009  of  25  May  2009  on  the  application  of  the  Protocol  on  the 
excessive  deficit  procedure  annexed  to  the  Treaty  establishing  the  European  Community  (OJ  L  145, 
10.6.2009, p. 1). 
In line with the “Specifications on the implementation of the Stability and Growth Pact and Guidelines 
on  the  format  and  content  of  Stability  and  Convergence  Programmes”  of  3  September  2012.  See: 
http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/coc/code_of_conduct_en.pdf 
In  2015,  under  the  planned  restructuring  of  the  Allied  Irish  Bank  (AIB)'s  capital  base,  part  of  the 
government's  preference  shares  were  converted  into  ordinary  shares.  This  conversion  was  done  in 
preparation for the envisaged sale of those shares, as part of the plans of the Irish government to return 
the  bank  to  private  ownership.  Under  applicable  accounting  rules,  this  conversion  increased  Ireland's 
general government expenditure (and, consequently, its general government deficit) in 2015. 

 
 
                                                 
– 

– 

– 

of GDP declining by 8.5% between 2010 and 2015. This was supported by an 
increase in the revenue-to-GDP ratio of ½% during the same period. 

The 2016 stability programme, submitted by Ireland on 29 April 2016, plans a 
decline in the general government deficit to 1.1% of GDP in 2016 and, based 
on a no-policy-change assumption, to 0.4% of GDP in 20179. The Commission 
2016 spring forecast projects a deficit of 1.1% of GDP in 2016 and, based on a 
no-policy change assumption, of 0.6% of GDP in 2017. Thus, the deficit is set 
to  remain  below  the  Treaty  reference  value  of  3%  of  GDP  over  the  forecast 
horizon. 

The  Commission  estimates  the  structural  balance,  which  is  the  general 
government  balance  adjusted  for  the  economic  cycle  and  net  of  one-off  and 
other temporary measures, to have improved by 6.7% of GDP over the period 
2011-2015.  

Ireland’s  general  government  gross  debt-to-GDP  ratio  has  steadily  fallen, 
having  peaked  at  120%  in  2013,  and  is  projected  to  be  on  a  downward  path 
over the forecast horizon. In particular, gross government debt fell to 93.8% of 
GDP in 2015 from 107.5% of GDP in 2014, due to the surge in nominal GDP 
and the sale of state assets, and is projected to decline further to 89.1% of GDP 
in 2016. The gross government debt ratio is forecast to continue decreasing to 
86.6% of GDP in 2017, also due to favourable cyclical conditions, historically-
low interest rates and primary budget surpluses. 

(11)  As  from  2016,  which  is  the  year  following  the  correction  of  the  excessive  deficit, 
Ireland  is  subject to  the preventive  arm  of  the  Stability  and Growth  Pact  and  should 
progress  towards  its  medium-term  budgetary  objective  at  an  appropriate  pace, 
including respecting the expenditure benchmark, and comply with the debt criterion in 
accordance  with  Article  2(1a)  of  Regulation  (EC)  No  1467/97.  In  this  context,  there 
appears to be a risk of some deviation from the required adjustment path towards the 
medium-term budgetary objective in 2016, while Ireland is projected to be compliant 
in  2017.  Ireland  is  projected  to  be  compliant  with  the  transitional  debt  rule  in  both 
years. Overall, further measures will be needed in 2016. 

(12) 

In accordance with Article 126(12) of the Treaty, a Council Decision on the existence 
of  an  excessive  deficit  is  to  be  abrogated  when  the  excessive  deficit  in  the  Member 
State concerned has, in the view of the Council, been corrected. 

(13) 

In  the  view  of  the  Council,  the  excessive  deficit  in  Ireland  has  been  corrected  and 
Decision 2009/416/EC should therefore be abrogated, 

HAS ADOPTED THIS DECISION: 

From an overall assessment it follows that the excessive deficit situation in Ireland has been 
corrected. 

Article 1 

Decision 2009/416/EC is hereby abrogated. 

Article 2 

9 

As government formation talks following the February general election were ongoing at end-April, the 
2016 Stability Programme submitted by Ireland was prepared on a no-policy-change basis. 

 
 
                                                 
This Decision is addressed to Ireland. 

Done at Brussels, 

Article 3 

For the Council 
The President