Government anger, arising from critical comments made by a European Commission official about water charge concessions, is understandable on a number of fronts. But it is unlikely to change the way the troika and the commission do their business under a post-bailout surveillance programme designed to improve the way the euro area functions.
Successful management of the economy is the Government’s prime selling point and is expected to dominate the coming general election campaign. Criticism of its fiscal policies from Europe would not help in that regard and a calculated, pre-emptive strike may have been designed to soften the cough of the troika. So, the Government was not only responding to commission concerns about water charge reductions, but probably anticipating disapproval with next October’s Budget. As Taoiseach Enda Kenny made clear yesterday, the Government’s priority will be to reduce taxation levels, rather than the overhanging debt.
Telling troika officials to "butt out" of Irish domestic affairs probably rates as a force two disturbance on the EU political Richter scale. Similar confrontations in Greece might qualify for a seven or eight, while seismic shifts involving France and Italy are less intense. Six years of economic hardship across Europe have contributed to voter exhaustion and widespread government unpopularity. Street protests and the rapid growth of eurosceptic and anti-austerity parties have pressurised governments, as Germany directs fiscal policy. A perception of different rules applying to different countries has grown with France, in particular, demanding respect "because it is a big country". The Government suspected the commission was treating Ireland as an easy target, especially as it was on track to meet its bailout commitments.
A key consideration in Dublin probably involved the effect such criticism might have on borrowing costs. Agreement had just been reach with EU partners on early repayment of IMF loans while Irish Water was also likely to need funds from the international market. Significantly, following the Irish visit, the troika report spoke of “significant progress” being made, while noting that important challenges remained. No reference was made to water charges.
The Taoiseach and Minister for Finance Michael Noonan have a record of rejecting unwelcome advice. Last October, the Fiscal Advisory Council was ignored when it recommended a €2 billion cut in the budget deficit. So were the commission and the IMF. Protests against water charges – a condition of the original bailout – brought further compromise. It marked a loss of Government authority and generated deeply resented criticism from a commission "source". At issue, however, is the Government's reputation for sound economic management.