There was “a lot of pessimism” among European leaders about the longer-term impacts of the war on Iran on energy prices, Taoiseach Micheál Martin has said.
Ireland was not “immune” to a slowdown in economic growth across the world as a result of the oil shock, given exports and trade was a big part of the Republic’s economy, he said.
The Taoiseach said he did not anticipate there being a need for a mini-budget this year, echoing recent comments from Tánaiste and Minister for Finance Simon Harris.
Martin was speaking on Friday morning in Nicosia, the capital of Cyprus, on the second day of an EU leaders’ summit where the war in Iran and the resulting energy crisis was high on the agenda.
The Taoiseach said other European leaders had expressed a grim view about the impact of the war.
Iran’s effective closure of the Strait of Hormuz, a key shipping route that brings oil and gas from the Gulf, has seen the price of energy soar, putting pressure on fuel-dependent industries.
“We do have to be conscious of the fact that the impacts of this oil shock could be more medium to longer term,” Martin said.
There was a growing fear the current energy crisis would be worse than the oil shocks of 1973 and 1979 and the 2022 Ukraine war all rolled into one, he said.
“The [European] Commission and others are saying, you know, you’ve got to keep funding in reserve if the situation gets worse and deteriorates,” Martin said.
Separately, Europe’s relationship with Israel had to be put under a “microscope”, in light of its “reckless” bombing of civilian infrastructure in Lebanon, the Fianna Fáil leader said.
The strikes on civilian populations during the war Israel launched against Hizbullah militants were “absolutely disproportionate” and “unacceptable”, he said.
“There has been a lot of displacement of civilian populations – significant consequences can flow from that, but fundamentally we welcome the fact now that there’s a ceasefire that has been extended in Lebanon,” he said.
However, the Taoiseach said the international community “can’t be overly confident” that the further three-week halt to the fighting between Israel and Hizbullah militants would hold up.
The summit in Cyprus saw the union’s 27 national leaders get stuck into contentious talks about the size and focus of the EU’s next seven-year budget.
The negotiations are set to become a significant feature of EU-level discussions over the coming months, with different coalitions inside the bloc competing to shape how the pot of cash will be spent.
The EU’s existing €1.2 trillion budget runs until the end of 2027 and encompasses Common Agricultural Policy subsidies, funding for roads and regional development, and a huge range of other schemes.
There will have to be “compromise” by national governments to agree a deal settling the new EU budget, Martin said.
It was “difficult to reconcile everybody’s priorities with the available budget … some think the budget is too high as it is, others think it’s not high enough. So those are the challenges,” he said.
The Government will have a central role in brokering that compromise during the second half of the year, when it holds the Council of the EU presidency, a deal-making role that rotates between countries every six months.
“We will aim to try and bring the negotiations on the budget to a conclusion during our presidency, which will be very challenging,” Martin said.
