Noonan says test is in return to markets

Fri, Jul 13, 2012, 01:00

MINISTER FOR Finance Michael Noonan has described the latest review of Ireland’s EU-IMF bailout as “successful”, but he cautioned that the real test would be Ireland’s ability to return to the debt markets.

At a press conference yesterday, Mr Noonan said the Government’s focus was now on reducing the debt burden to help stimulate economic growth and on balancing the budget.

“If you look at the programme in terms of fulfilling all the commitments that we talk about – as I said, we’ve fulfilled 120 of them – then it’s a very successful programme. But the real test of success is getting back into the markets.

“We need a more sustainable debt position and we need to continue in driving the deficit lower, to ensure that we’ll get fully funded in the market at reasonable rates at the back end of next year,” he continued, adding that the recent sale of short-term debt by the NTMA represented “some progress”.

Mr Noonan said the Government would be “ambitious” with respect to its request for a reduction in Ireland’s €64 billion bank debt after euro zone finance ministers agreed in principle on Monday to retrospectively apply the same measures to Ireland as had been agreed for Spain’s troubled banking sector.

“What we want from a negotiating point of view is a public announcement in October that there is agreement about measures to make the Irish debt position more sustainable.

“As soon as that happens, the markets will price that in. That will allow the NTMA then to proceed in getting market funding and continue the process of getting us back into the market with paper of longer maturity.”

Mr Noonan said that without a reduction in the debt burden, the economy would struggle to perform “to expectations”.

“It’s like driving with the handbrake on,” he said.

Minister for Public Expenditure and Reform Brendan Howlin said tackling long-term unemployment remained the Government’s “most daunting task”.

“We need to have that firmly in our sights in everything we do,” he said.

He added that it had been agreed with the troika that 50 per cent of the proceeds from the sale of State assets would be set aside for “stimulus and job-creating endeavours”.

“It is expected we’ll be testing the market on these assets next year. You know that the assets concerned are the energy division of Bord Gáis Éireann and some of the generating capacity of the ESB.”

Mr Howlin played down the recently reported overspend by the Department of Health, insisting that the Government would meet its targets.

“I wouldn’t exaggerate it. The overspend is 2 per cent of the budget in health and a tiny fraction of the overall fiscal target.”

The two Ministers appeared in relaxed mood, likely buoyed by new figures from the Central Statistics Office that revealed the economy had grown by twice as much as originally thought last year.

“The CSO figures are to be welcomed because they revisited last year’s figures and they’re now showing that growth last year was 1.4 per cent,” Mr Noonan.

“In cash terms it means that the economy is €2.5 billion bigger in 2011 than we thought it was.”

Mr Noonan refused to be drawn when asked what was the minimum reduction in Ireland’s debt burden that he would accept.

“If I say that my friends in Europe will offer me the minimum . . . You mustn’t have ever been at the Fair of Glen or sold a calf or anything like that,” he quipped.

The Ministers said their respective parties were sticking by a programme for government commitment that said income taxes would not be increased and basic social welfare rates would remain unchanged in Budget 2013.