Troika says State will achieve fiscal targets this year
THE TROIKA of international lenders to Ireland has said the Government will meet its fiscal targets for 2012, but has highlighted a number of “significant risks” and challenges for 2013 that need to be addressed.
In a statement issued yesterday upon conclusion of the eighth quarterly review of Ireland’s bailout programme, the European Commission, European Central Bank and the International Monetary Fund praised “steadfast” progress on policy implementation and acknowledged that Ireland was the best-performing of the bailout programme countries.
However, the troika’s concerns included over-runs in the health sector this year, the need for more “vigorous” progress on job-activation, and mortgage arrears, where it said “intensified efforts” were required.
For its part, the Government said it was “very confident” that Ireland would exit its bailout programme at the end of next year even if no deal was reached on reducing the historic cost to the State of bank recapitalisation.
Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin said the Government would prepare a paper outlining the steps and options the Government could take to exit the programme at the end of 2013.
“I am very confident that we will exit the programme in all circumstances,” said Mr Noonan. “If we get a deal on the we will access money at a much lower interest rate. That is the variable.”
Mr Noonan also said he hoped ECB president Mario Draghi would announce that Ireland would benefit from its bond-buying programme as it exits the programme. Such a statement by Mr Draghi could reduce the interest rate on long-term bonds by as much as two percentage points.
Mr Howlin said he was confident Ireland would be the first programme country to exit a programme.
“We are the most successful programme country. We have hit all the targets,” he said, noting that Ireland had drawn down 80 per cent of the €67 billion and fulfilled 160 conditions.
Mr Noonan said one strategy would be to raise 18 months of funding for Ireland on the markets next year and have that kind of reserve in place to prevent shocks. That would entail raising €17 billion.
The troika statement stressed that “vigorous” implementation of the Pathways to Work jobs-activation programme was necessary to strengthen employment services and training. This was taken to be a criticism that there had not been enough progress on activation by the Government.
On a more general level, the statement concluded: “Significant risks remain along the path back to full reliance on market funding, requiring continued determined policy efforts by the Irish authorities.” This was interpreted as a signal that there was little over a year left for the Government to undertake structural reform that was unpopular, but which could be achieved using the overseeing role of the troika in Ireland as “cover”.
The troika statement projected growth for next year at 1 per cent. However, Mr Noonan said that while growth projections were “marginally adjusted” downwards, revenue flows from taxes would still be on target because of the compensating effect of inflation.
The statement from the troika described unemployment levels as “unacceptably high, especially among the youth”. As well as vigorous job-activation measures, it also suggested the private sector should be involved in providing employment services.
Mr Noonan was asked why the Personal Insolvency Bill had set a cap of €3 million for secured debt.
He acknowledged that the ECB had wanted a much lower figure of €1 million, but said it had been agreed that the higher cap would be used and then reviewed.