It means the government could potentially be given more room to invest in infrastructure
Ireland could get flexibility on EU fiscal rules due to Brexit, according to MEP Brian Hayes.
The Vice President of the European Commission, Valdis Dombrovskis wrote to Brian Hayes MEP stating that the effects of Brexit could potentially be considered as an 'exceptional circumstance' for Ireland under EU fiscal rules.
This would give the country leeway on debt and deficit targets.
Speaking about the news, Mr Hayes said "Commissioner Dombrovskis has opened the door for Ireland to be given flexibility on EU fiscal rules in the event that Ireland suffers from exceptional and short-term economic costs from Brexit."
The European Fiscal Compact of 2012 limits how much money we can spend on budgets, including limits on capital spending.
If Ireland gets a special dispensation from the EU, it means these limits are somewhat lifted so we can borrow more without breaking EU law.
This means we could potentially borrow more money to finance our infrastructure, public transport and communication services.
In regards to the government deficit, The European commission set a 3% General Government Deficit limit, as well as a 0.5% structural deficit target, which Ireland shouldn't go above.
If we were given more fiscal flexibility, we could breach the 3% deficit target set by the EU, but the European Commission wouldn't have to trigger the Excessive Deficit Procedure (EDP) due to the exceptional circumstances clause.
Hayes described where we are at currently "While we are well below the EDP currently, we may need some flexibility in coming into complete balance should the economy underperform."
He continued by saying "Commissioner Dombrovskis has made it clear that a Member State can request temporary flexibility from EU fiscal rules if they are hit by ‘well-identified costs’ from an exceptional event (i.e. Brexit)."
The ‘exceptional circumstances’ provision has been used twice in the past, firstly for Member States who were getting an overwhelming inflows of refugees and secondly for Member States burdened with security costs due to terrorist threats.
Hayes said that "Compared to any other country in the EU, Ireland is economically the most vulnerable from Brexit. No other country has such close economic and trading ties with the UK.
The Department of Finance has said in the past that in a worst case scenario we could suffer potential losses of €20 billion over a decade due to the impact of Brexit.
Mr Hayes finished by saying "As it stands, the EU fiscal rules already impose tight restrictions on government spending on our public services. If the impact of Brexit were to limit our expenditure further, we need to be ready."