State is meeting bailout targets, says troika

THE GOVERNMENT is meeting the targets set under the €85 bailout plan but there are domestic and international risks and more sacrifices to be made, the so-called troika of lenders has warned.

The troika of the European Commission, the European Central Bank and the International Monetary Fund praised Ireland for sticking to the bailout programme.

“Ireland is not yet out of the woods and it will be a long journey but it is making real progress,” said Istvan Szekely, the commission country director for Ireland.

In its latest quarterly review of the plan, the troika said a balance must be struck between correcting the public finances and growing domestic demand in the economy.

IMF deputy director Ajai Chopra said outside investors did not just want fiscal adjustment in Ireland but also economic growth.

The troika warned that unemployment remained “unacceptably high” and that further reforms of the “sheltered” legal, medical and pharmacy professions – and the privatisation of State companies – would lower costs, including electricity costs, for consumers.

“We want to make the consumer king and we are close to the coronation here,” said Mr Szekely.

Pointing to one example of high costs, he said that in Brussels, where he lives, it costs half of what it does in Ireland to visit a GP.

The sale of public companies would lower costs and raise revenue for the Government, he said.

The troika said it had assessed the cost of all possible spending cuts and tax increases for the December budget but that the scale and type of savings sought was for the Government to decide.

The Minister for Finance Michael Noonan hinted at an earlier press conference that he may not need to seek savings substantially beyond €3.6 billion in the budget to meet the troika’s deficit target of 8.6 per cent of GDP next year.

The Government has faced calls to seek savings of greater than €4 billion in this year’s budget.

Mr Noonan said the troika had not objected to finding budget alternatives to income tax rises and social welfare rate cuts.

“The troika made it clear that they had no difficulty in substituting one fiscal measure for another with an equal value,” he said. The Government would not break its promises on income tax or social welfare cuts, he said.

The Minister said the Fiscal Advisory Council’s suggestion of a more ambitious 1 per cent deficit target by 2015 – instead of 3 per cent – was “a bridge too far”.

“To pull it back to 1 per cent would mean an additional correction of €4 billion . . . It’s a very big ask,” said Mr Noonan.

The final figure for this year’s savings depends on tax receipts in October and November, he said.

Minister for Public Expenditure Brendan Howlin said there would be no fire sale of State assets and companies to generate €2 billion.

The troika said it has not set any deadlines on the disposal of assets as it did not want to remove room to manoeuvre in the sale process.

Mr Chopra said that generally the troika had no concerns about the programme targets being met.

“There is a very significant meeting of minds on the objectives and the way to meet those objectives,” said the IMF mission chief.

He said the EU debt crisis and a weaker global economic outlook posed risks to Ireland’s recovery, which has been driven by exports.

Ireland was trying to address mortgage arrears in a “sensible” way through tailored, case-by-case solutions that retain an incentive to continue repaying, he said.

The troika said that it would have to work with the Government to consider opportunities to tackle youth unemployment.

“No one wants to have a lost generation,” said Mr Szekely.