The European Commission has criticised the Irish government for failing on social housing, environmental targets and for an unbalanced economy in a new report.
Officially calls “country specific recommendations…on the economic, social, employment, structural and budgetary policies of Ireland”, the report is a blow by blow assessment of the government.
And the conclusions are damning.
Ireland’s public finances face significant risks; the healthcare system is unaffordable; economic growth is not fairly spread across the country; Ireland is not meeting climate change targets; the electricity grid is at risk of overloading; social housing is inadequate; wastewater is going untreated and underrepresented groups like people with disabilities have poor job prospects.
Ireland has not been singled out. The European Commission has carried out the same wide-ranging assessment for all 27 EU member states.
But the report highlights a wide range of problems.
ECONOMY
“Ireland’s public finances are subject to significant risks due to its tax revenues being highly concentrated on relatively few foreign-owned multinational companies. Corporate tax receipts, which have more than doubled since 2019 and amounted to EUR 28.1 billion (19% of government revenue) in 2024, are particularly exposed. In 2023, over half of these receipts were paid by just 10 large companies. Moreover, the authorities estimate that half of corporate tax revenues are ‘windfall’ and highly uncertain in nature. As a result, international developments such as changes in the US trade and tax policy or the global tax environment could have a significant impact on the stability of Ireland’s revenue. The establishment of the Future Ireland Fund and the Infrastructure, Climate and Nature Fund serves to channel windfall revenue to longer term spending objectives. Ireland would benefit from increasing the resilience of its public finances by diversifying its revenue sources. To this end, Ireland could increase the yield from taxes on capital and wealth, review tax expenditures that do not effectively achieve the desired level of redistribution or other objectives, or improve the way the tax system supports environmental objectives.”
HEALTHCARE
“On the spending side, concerns remain related to the impact of the healthcare system’s cost-effectiveness on fiscal sustainability. Population ageing is projected to lead to Ireland’s spending on public healthcare to increase by 1.5 percentage points by 2070 as a percentage of GDP, well above the projected EU-average increase of 0.4 percentage points. As the healthcare system is overly reliant on costly hospital care, exacerbated by the lack of universal primary care coverage, there is scope for reform to alleviate the strain on hospitals.”
REGIONAL INEQUALITY
“At the same time, Ireland continues to face challenges, including the need to boost competitiveness, especially in the North West region, which is lagging behind in economic performance, as well as social disparities in the labour market integration of disadvantaged groups. In accordance with Article 18 of Regulation (EU) 2021/1060, Ireland is required – as part of the mid-term review of the cohesion policy funds – to review each programme taking into account, among other things, the challenges identified in the 2024 country-specific recommendations. The Commission proposals adopted on 1 April 202515 extend the deadline for submitting an assessment – for each programme – of the outcome of the mid-term review beyond 31 March 2025. It also provides flexibilities to help speed up programme implementation and incentives for Member States to allocate cohesion policy resources to five strategic priority areas of the Union, namely competitiveness in strategic technologies, defence, housing, water resilience and energy transition”
PRODUCTIVITY
“Productivity growth in Ireland is predominantly driven by multinational companies, while productivity among domestic businesses – mostly small and medium sized enterprises – is comparatively lower than their EU counterparts. This highlights the need to boost domestic innovation capacity. Heightened geopolitical uncertainty emphasises the urgent need to build a more resilient, innovation-driven domestic economy.”
FOSSIL FUEL DEPENDENCY
“Ireland continues to rely on fossil-based energy sources. This dependence poses a significant challenge to reducing overall GHG emissions and to meeting Ireland’s target under the Effort Sharing Regulation to reduce non-ETS emissions by 42% by 2030 compared to 2005. The latest emission projections indicate that Ireland is not on track to meet this target.”
POLLUTING HOUSING
“The residential sector is a significant source of Ireland’s greenhouse gas emissions, generating 9.7% of domestic emissions in 2023, with the building stock being one of the most carbon-intensive stocks in the EU. Accelerating energy efficiency measures across the building stock would help meet sectoral emission ceilings and strengthen Ireland’s energy security.”
ENERGY PRICES
“The energy cost reduction benefits deriving from further deployment of renewables is increased efforts to improve the flexibility of the electricity system and modernise and expand grid capacity, including internal reinforcements and cross-border projects, to reduce curtailment. In 2023, nearly a tenth of wind and solar power had to be curtailed due to capacity constraints, and this trend has been increasing in recent years. This keeps prices high and delays the transition towards cleaner sources of energy.”
GRID STRAIN
“The anticipated additional deployment of renewable energy, increasing electricity demand from continued electrification of heating and transport, and the growing number of data centres will put further strain on the electricity system. This highlights the need to construct infrastructure to link increasing demand centres with the supply of renewables generation and to update existing network infrastructure to increase its capacity. A related element concerns demand-side response, including consumer empowerment measures such as ensuring that private consumers have access to dynamic price markets, which can be an important means to provide flexibility in the energy system.”
ELECTRIC CARS
“With a ratio of one charging point for every 21 vehicles–well below the EU average of one charging point for every 7 vehicles – regional disparities, particularly in rural areas, remain a barrier to the uptake of zero-emission vehicles.”
SEWAGE
“Increased investment is essential to tackle the persistent deficiencies in supply and wastewater treatment systems, particularly in urban areas. These gaps risk undermining environmental compliance and limiting the potential for sustainable, cross-sectoral development, including housing and water-dependent sectors. High leakage rates – at 37% in 2023 – remain well above the EU average of 25%, while several key wastewater treatment plants could benefit from improved performance.”
WASTED WATER
“. A water-pricing mechanism that better reflects the cost of water use could foster a stable and transparent framework for long-term investment and planning in water infrastructure, while also promoting a more efficient and sustainable consumption across sectors.”
RECYCLING
“Ireland remains below EU circular economy benchmarks, with municipal waste recycling at 41% in 2020 and a circular material use rate of just 2.3% in 2023, both significantly below EU averages. Ireland is at risk of missing the municipal waste target for 2025. To meet environmTo meet environmental objectives, estimates suggest that EUR 749 million per year are needed to address circular economy investments.”
AFFORDABLE HOUSING
“The construction of affordable and social housing is scaling up but is still behind current needs and targets. This affects Ireland’s competitiveness by putting pressure on wages and limiting the ability of businesses, particularly SMEs, to attract skilled workers. The public sector struggles to maintain sufficient workforce levels in sectors such as education, healthcare services and construction. This highlights the need for continued action to address capacity constraints in the residential construction sector.”
PEOPLE WITH DISABILITIES
“Traditionally underrepresented groups, such as people with a disability and single parents, continue to have employment rates below the EU average.”
The European Commission aim is to encourage the Irish government to make improvements. And there are a range of specific recommendations.
- Reinforce overall defence spending
- Improve the business environment by increasing public R&D investment and supporting the increase of business R&D investment
- Reduce overall reliance on fossil fuels and accelerate the deployment of renewables, including by streamlining the planning [system]
- Increase investment in water infrastructure, to improve water quality and reduce leakages. Accelerate investments to speed up the circular economy
- Further increase the supply of social and affordable housing.