State finances take hit after €1bn payment to EU budget

A RECORD €1bn Irish payment into the European Union budget was a significant factor in a deterioration in the State’s financial position last month and will bring home the stakes in difficult talks due to kick off in Brussels.

April’s Exchequer Returns record a “slight deterioration in the budgetary position”, analysts at Davy said last night.

The figures show a deficit of €3.43bn for Finance Minister Paschal Donohoe’s (right) department, almost €900m worse than at the same time last year – driven largely by higher outgoings, including the payment to Brussels.

That gap is likely to close during the year as tax receipts pick up. Ireland is one of nine richer member states which are net contributors to the EU at a time when the overall structure of funding is up for review. Yesterday, the European Commission proposed an enlarged, multi-year budget that will have to make up for the shortfall of Brexit next year. The commission sees the budget talks as an opportunity to expand programmes in relation to investment, security and defence and refugee resettlement despite the loss of UK funds.

The Dutch have already led the charge for states unwilling to step into the Brexit breach. “A smaller EU should have a smaller budget,” the Netherlands’ Prime Minister Mark Rutte said. His nation has positioned itself in a leadership role among northern countries, including Ireland.

However, its position will be challenging for the Irish Government, including when it comes to funding farmers through the Common Agricultural Policy (CAP).

France’s agriculture minister said it was “simply unthinkable” to implement a policy of shaving 5pc off Brussels’ hefty spending on farm subsidies.

As part of its opening bid, the commission has proposed a new mechanism to cut the flow of funds if authoritarian governments in member states impinge on independent judges – a policy aimed at right-wing regimes in Poland and Hungary in particular.