Pharma ‘patent cliff’ a drag on this year’s growth figures, says Noonan
EU banking deal stalls on pace of mutualisation of €55bn shared fund
Finance ministers Harris Georgiades of Cyprus, Jutta Urpilainen of Finland and Michael Noonan of Ireland at the Ecofin meeting in Brussels yesterday. Photograph: Peter Cavanagh
Minister for Finance Michael Noonan has warned that the so-called patent cliff in the pharmaceutical sector could affect Ireland’s growth figures for this year.
Speaking ahead of the publication of European Commission forecasts for member states next week, Mr Noonan expressed confidence in Ireland’s growth prospects for next year.
“All the soft data around is quite positive at present,” he said. “As the hard data comes, we hope it will be positive again. But we still have a problem with the patent cliff in the pharmaceutical industry, and that’s acting as a drag back on our growth figures.”
On Monday the Minister indicated that the Government intended to widen the average rate band of income tax in the next budget, hinting that a growth rate of over 2 per cent would strengthen the case for income tax cuts.
He was speaking after a meeting of finance ministers in Brussels yesterday where little progress was made on advancing agreement on the single resolution mechanism for resolving and restructuring
Representatives of the European Parliament met late on Monday night to thrash out disagreements on the structure and decision-making aspects of the fund. A key issue is the pace of mutualisation of the €55 billion fund, with Germany reluctant to embrace a shared, mutualised fund which would pool the bank levies from EU states.
Speaking during a public session of the meeting yesterday, German finance minister Wolfgang Schäuble appeared to cede some ground on an accelerated timetable for the fund, but said a speed-up in the mutualisation should be accompanied by an acceleration of the period in which bank levies were paid. A number of countries – including Ireland and France – advocate that the fund be mutualised within five rather than 10 years, as set out in the deal struck by member states in December.
After the meeting, Minister for Finance Michael Noonan expressed confidence that a five-year timetable would still be adopted, and agreement reached by March. “Generally speaking I wouldn’t be surprised if it settled on five,” he said, though a seven-year time frame was also under consideration.
He said the principle behind the fund was the need to separate banking and sovereign debt. “If you have a fund that doesn’t mutualise for a long time, you’re delaying the mutualisation . . . a lot of people want to get the resolution fund in place at an earlier date.”
Mr Noonan also raised questions about the scale of the fund, echoing calls from other EU figures, including ECB president Mario Draghi, that a backstop should be in place while the fund is being accumulated.
He expressed doubts that the size of the fund would be sufficient. “I think an additional backstop is needed. “When you think of European banks having multi-trillions of assets on their balance sheets, the fund itself is quite small.” However, Mr Schäuble said the question of a backstop could be considered in the future.
One way to expand the capacity of the fund would be to allow it to borrow on markets with the backing of state guarantees, eurogroup chairman and Dutch finance minister Jeroen Dijsselbloem said yesterday.
Negotiators for the Greek presidency will meet representatives from the European Parliament today with a renewed mandate from member states to offer a compromise in negotiations on the deal. All sides are anxious to reach final agreement on the second strand of banking union before the parliament breaks up in May.