By Andrew Bushe
DUBLIN — The Irish government has set itself on a collision course with the European Commission in an unprecedented row about a Brussels recommendation that Ireland be rapped over knuckles for budgetary policies it claims are accelerating inflation and risking overheating.
It is the first time a formal remand has been recommended by the Commission to any country in the 12-nation euro-zone and it has caused widespread anger in Ireland.
The government believes Ireland has been singled out to be made an example of for bigger economies, that there is jealousy about the Celtic Tiger successes and widespread opposition to low corporation taxes that are regarded in many European capitals as a job-poaching measure.
The Commission rebuke recommendation now goes to a meeting of Europe’s Finance Ministers on Feb. 12 when they can choose to endorse or reject it.
The message that Ireland’s policy on spending, particularly tax cuts in the last budget were heading the country toward overheating and greater inflation, was delivered by the Spanish socialist commissioner for economic and monetary policy, Pedro Solbes.
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It drew a trenchant reply from the taoiseach, tanaiste and finance minister, who all indicated there would be no u-turn.
"There will be no policy changes vis-a-vis the budget, which was laid down in December," Finance Minister Charlie McCreevy said.
"All in all, I feel that what the EU is intending to do is totally disproportionate. National governments have direct competency in terms of their own national budgets."
McCreevy found it "quite amusing" that the president of the Commission, Romano Prodi, had said the star pupil of the class should be the first to be given a reprimand.
"We have the highest growth rate, the highest surplus, the lowest GDP to debt ratio and practically full employment," McCreevy said. "We have been lauded throughout the world as the success story of the 1990s.
"What they would like me to do is take money out of the economy by changes in expenditure. Take a couple of hundred million out expenditure and take a couple of hundred million out of the promised taxation reductions.
Fine Gael finance spokesman Michael Noonan, however, described the reprimand as a "slap in the face" to McCreevy and said it was clear budgetary policy was now putting economic prosperity at risk.
"If the downturn in the United States moves into full recession, Ireland will find itself in a worse position than at anytime in the last three years," he said
He described McCreevy as being like a footballer who, when he gets a yellow card, tries to justify himself to the crowd behind the referee’s back.
"Players who indulge themselves in this manner usually end up with a red card," he said. "It will be interesting to see whether the European Commission or the Irish people will be the first to put Minister McCreevy in the sin bin."