Ireland is holding off on applying for close to €1bn in EU Covid-19 money as it angles for a bigger slice of the bloc’s Brexit fund.
t puts the government at odds with its European peers, who are clamouring to draw down as much as they can from the €672bn available in the Covid envelope.
Brussels received recovery fund requests from 14 countries last week, with France and Germany – the architects of the funding – claiming they were “driving the recovery” together.
Ireland’s rich northern European neighbours, Luxembourg, Belgium and Denmark, also sent their applications by the ‘soft deadline’ of April 30.
The money is conditional on detailed reform plans that are in keeping with annual EU recommendations on anything from housing to tax.
The Government says it is waiting a few weeks in order to firm up the National Development Plan before it sends its reform plan to Brussels.
It has played down reports the delay is due to EU pressure to make tax reforms.
“This process of engagement with the Commission is continuing,” said a spokesperson for the Department of Public Expenditure and Reform. “The format of the plan will be in line with Commission guidance.”
The European Commission echoed that sentiment on Friday.
“I don’t see it in the way you frame it: that this is the Commission forcing Ireland to do something that it doesn’t want to, because Ireland is well able to articulate its concerns,” EU financial services commissioner Mairead McGuinness told the Irish Independent. “Some member states have got their plans in, others are well prepared, I think others might come later, and the Commission has said repeatedly that they don’t want plans in at speed, they want plans that will work.”
The recovery money – the Government expects at least €915m in grants, which could be lower if 2020 growth is stronger than estimated – is not a huge amount of money compared with the €88bn in projected spending in Budget 2021.
It is also much less than the €2.5bn Ireland was granted from the EU’s SURE unemployment insurance scheme last month. It also comes with conditions.
At least a third must be spent on green projects, a third on digital upgrades and a third on jobs and social schemes.
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The Government will have to meet certain targets and deadlines to ensure all the money is paid out by 2026.
Yet Edgar Morgenroth, a Professor of Economics at Dublin City University, said the money could be a “game changer” for organisations such as the Sustainable Energy Authority of Ireland.
“It might not be billions, but to achieve our climate goals we need to do a lot more,” he said. “Although the level of ambition also depends on the capacity of the construction sector to do any of this.”
Michele Connolly, head of infrastructure and corporate finance at consulting firm KPMG, said the money will be funding projects that are already planned.
“The government has been making the projects fit the criteria and Ireland is not alone in that. It’s not necessarily where countries want to spend the money to drive the recovery. But we’ll be able to spend it.”
The recovery fund also offers conditional loans to EU countries, although the Government has hinted it will not be tapping that facility – although officially, the option is still on the table.
Eddie Casey, chief economist at the Irish Fiscal Advisory Council, said there is an argument for considering an EU recovery loan.
“It sends a signal of joint action with other EU countries. But the merits for it are weaker than the grant funding, given that Ireland is currently able to borrow at low interest rates on the market.”
However, the Government has its sights set more keenly on a separate €1bn in grants from the EU’s Brexit adjustment reserve, a €5bn fund set aside for countries that trade heavily with the UK.
The funding is easier to get and will come as a lump sum next year, rather than spread out over four years, like the recovery money. It will be funnelled to individual employers or farmers, rather than allocated to specific projects. As long as Ireland can reach an agreement with France on how to share out the €5bn.
Fianna Fail MEP Barry Andrews told the Irish Independent last week the French were making a “smash and grab” for the money, a quarter of which was initially allocated to Ireland. France would like the money to be allocated based not only on volume of trade with the UK but on a country’s share of overall GDP within the EU. It could see Ireland lose up to €200m from an intial €1.1bn offering.