Ireland set out positive stall during week of IMF talks in Washington DC
ANALYSIS:THE FINANCE ministers, central bankers and associated hangers-on of the world concluded the spring meetings of the International Monetary Fund and World Bank Group in Washington DC yesterday, following a week of press conferences, seminars, closed-door negotiations and a lot of networking.
The big news out of this year’s gathering was that the IMF secured $430 billion in new money to help tackle, among other things, a possible worsening of the sovereign debt problems in Europe.
Managing director of the IMF Christine Lagarde described it as “the Washington moment”.
“We made a call to action and our members have delivered,” she declared on Friday.
But she insisted the “anti-crisis firewall” had not just been raised to help the euro zone. In saying this, Ms Lagarde was most likely trying to appease those of the fund’s 188 members who have expressed reservations about further propping up the single currency – chiefly Canada and the UK.
Meanwhile, the burgeoning crisis in Spain was being discussed on the fringes.
Ireland was represented by a small but high-powered delegation of two at the meetings, which took place at the IMF headquarters on Pennsylvania Avenue, a few blocks west of the White House.
Governor of the Central Bank Patrick Honohan was there, along with the secretary general of the Department of Public Expenditure and Reform, Robert Watt.
This time last year, the EU-IMF bailout programme, approved at the end of 2010, was only a few months old, and Honohan, who attended the gathering last year, was busy raising capital for the banks. There wasn’t a whole lot to say that was positive.
This year was different.
According to Watt, their trip was about setting out what Ireland has achieved since the EU-IMF programme began, “to people who matter here”.
We are here “to emphasise that we’re on the path to recovery, that there are positive signs for the economy, that we have our programme and we’re delivering on ”, he said, in the pleasant surrounds of an outdoor coffee shop (purpose-built for the event) at the IMF building. He excused himself for a moment to greet Ajai Chopra, the man with oversight of the IMFs mission in Ireland, as he wandered by.
The coffee shop was the place where, if you sat for long enough, you would likely spot every key decision-maker who was in town. As one keen observer put it, “If there’s anybody you want to meet, this is the moment where you’ll be sure to meet them.” And it only happens twice a year.
The official schedule for the week of meetings was colour-coded, according to who could get in. Red indicated an official IMF/World Bank meeting. Light green events, such as a Policy Roundtable on the Future of Financial Regulation and a Fiscal Forum, could be attended by invitation only.
Watt was invited to participate in the latter. One must imagine that, given the scale of the euphemistically termed “fiscal consolidation” – a key phrase of the week – under way in Ireland, he had no shortage of material.
Blue was designated for press conferences. These were attended by financial journalists from the world over, each of whom was sure to ask a question relevant to their country of origin. At one early-morning press conference with Lagarde, the managing director was asked by a Chinese journalist about her “lovely” jacket on a trip to China two weeks earlier. Suffice to say the answers to some questions were more compelling than others.
And of course there were questions about Ireland, primarily aimed at Chopra – a friendly, mild-mannered character who confessed to being bemused by the fact that people now recognise and approach him in Dublin. “They say nice things,” he bumbled, politely.
Chopra presented a paper (coded “dark green”, for open attendance) on the IMF’s programme in Ireland alongside the heads of the programmes in Portugal and Greece, who also delivered updates on their respective jurisdictions.
The short version: even if everything goes as well as could be expected in Greece, things will still be bad; Portugal is more or less on track and hanging in there; the Irish experience has been positive “so far” but “risks remain”. It was at this point Chopra said he and his colleagues had been making the case for additional support for Ireland from Europe. He declined to elaborate when asked, saying the IMF didn’t want to be “too prescriptive” about the type of support that should be given. He added only that the fund has had “long-standing suggestions on how to strengthen the common financial stability architecture in Europe and that remains very much on the agenda”.
If the Irish have been in his ear at all, however – and they have – it seems likely that support might look like a restructuring of the €31 billion promissory note used to recapitalise Anglo Irish Bank and Irish Nationwide (now the Irish Bank Resolution Corporation) which Honohan and the Government have been pushing for, both in front of and behind the scenes for some time.
Last week, Minister for Finance Michael Noonan told the Dáil the Government was still seeking a deal that would replace the promissory note with an European Financial Stability Facility-backed mechanism that would lengthen the period of repayment and lower the interest rate to reduce the burden on the taxpayer. No doubt Honohan’s trip to Washington provided further opportunities to have a word with those who might help further that agenda.
At events like this, it is at the un-colour-coded meetings (ie those not listed on the official schedule) and the chance encounters on the margins where real influence can be exerted on people close to the decision-making process. Cultivating relationships and contacts plays an important role.
Of the IMF programme countries in the euro zone, Ireland is the one perceived to be doing best. The public relations offensive engaged in by the various arms of Government is working.
In fact, it has almost been too successful, leading (according to one official) to a tendency by some to disregard the fact that Ireland’s problems are still quite considerable.
But the IMF has its own set of rules, and insists that they be followed – just ask Jamaica or Egypt what happens when you don’t. (You go “off track” until you’re ready to do it the IMF way.)
The fact that Ireland is now a poster child for toeing the line certainly earns IMF brownie points. And getting that message out is key to garnering support for the several years of “adjustment” that lie ahead – particularly as divisions over how to manage the recovery manifest further. The European authorities continue to seek to drive home austerity while the stated focus of the IMF is on economic growth.
The Government has already bought time with the promissory note. The first of 10 €3.1 billion payments – due last month – has been pushed back for 13 years. That was a first, small step in what will be a protracted discussion on how to handle the bank debt.
It seems likely that Honohan and Watt were laying the groundwork for taking the next of those small steps last week.
Chopra said he had been making the case for more support for Ireland from Europe