Noonan 'very confident' of State bailout exit in 2013
The Government has said it is “very confident” that Ireland will exit its bailout programme at the end of next year irrespective of reaching any deal on relief on the cost of bank recapitalisation.
The two key Government Ministers dealing with the troika of international lenders said this morning that the European Commission will prepare a paper outlining the steps and options the Government can take to exit the programme at the end of 2013.
“I am very confident that we will exit the programme in all circumstances,” said Minister for Finance Michael Noonan.
“If we get a deal on the [bank debt] we will access money [on international bond markets] at a much lower interest rate. That is the variable.”
Minister for Public Expenditure Brendan Howlin said he was confident Ireland would be the first programme country to exit successfully. “We are the most successful programme country. We have hit all the targets,” he said.
Mr Noonan and Mr Howlin were speaking at a press conference to mark the end of the eighth quarterly review of the four-year bailout programme overseen by the EU Commission, the European Central Bank and the International Monetary Commission.
Mr Howlin said that over 80 per cent of the money has been drawn down and Ireland has now fulfilled 160 conditions, and were now thinking of an exit strategy.
The troika have advanced loans of €67 billion to Ireland covering the period.
Mr Noonan said the international experience with such programme was that there was always some assistance at the start.
“There is a little bit of hand-holding. It is not like with one bound we are free. What we need to see is the mechanism the IMF uses and what mechanisms are available through the banks,” he said.
Mr Noonan emphasised several times during the press conference that Ireland’s position would be helped by a deal on bank recapitalisation and also by a statement nearer to the time by ECB President Mario Draghi that Ireland could avail of the ECB bond-buying programme in addition to countries like Italy and Spain.
He said that could improve the funding position by a reduction of up to 2 per cent on the interest rates for longer-term bonds. But he and Mr Howlin also repeated several times their belief that Ireland would exit the programme by 2014.
Mr Noonan also disclosed that his ideal position would be that Ireland could raise funding for 18 months and maintain the position on an ongoing basis.
If Ireland reached its 3 per cent deficit target that would need to borrow €10 billion in funding per annum from the markets, he said. “Suppose we were prudently to say we would like to keep 18 months funding [in advance] then €17bn or so would need to be put in place over the next year.
“It is one way of doing it, to always have a year-and-a-half’s funding.
“We want to get it at the right interest rate. If Mr Draghi made a statement that [ECB bond-buying] would be available to a country leaving the programme it would take 200 points off the interest rate,” he said.
Mr Noonan also disclosed that the growth rate for next year will be lower than projected (in its own statement released shortly after lunchtime the Troika said it would be close to one per cent). He described it as a marginal mark down and said, because of inflation, it would not affect the fiscal figures on the tax flow.
He also said that there was a €2.4 billion repayment due in January 2014 which was an issue but was a much lesser figure than the €12bn that was originally scheduled to fall due for payment at that time. NTMA have entered the markets periodically over the past year to raise funds and reduce that figure.
The issue of distressed mortgages also came up. Mr Noonan said there was new data that showed that new cases of households with impaired mortgages had reduced substantially. He said he would wait for a little longer to see if this was a definite pattern.
“We are very close to the point where we can quantify the number of people with impaired mortgages,” he said.
Asked about discussions about overspends in Government departments, especially health, Mr Howlin said that there were minor slippages but they were being addressed. He said Troika officials were content with savings that had been achieved through the Croke Park agreement with public servants.
Addressing overspend in the health sector he said he and Minister for Health James Reilly would “move might and maim” to ensure the deficit was brought down.
Asked would the Department of Health be €500 million over budget for 2012, he said he did not expect it to be that high.
The troika review ran from October 16th to 25th and involved a series of meetings with Government ministers, opposition politicians, unions and other interested parties.
The troika raised concerns about the level of personal and household debt. “Intensified efforts are required to deal decisively with mortgage arrears and further reduce bank operating costs,” it said.
“Parliament is currently considering an ambitious reform of the personal insolvency framework. For this essential reform to succeed, a careful balance should be struck that addresses borrowers’ financial distress and protects the family home, while also reinforcing debt service discipline.”
On budget plans, the troika suggested: “The measures adopted in Budget 2013 should be durable, as growth-friendly as possible, and minimise the burden of adjustment on the most vulnerable.”
European Commissioner for economic and monetary affairs Olli Rehn also raised concerns at the 14.8 per cent unemployment rate.
“Many essential reforms have been implemented that can help the Irish economy to recover competitiveness, restore sustainability to public finances and lay the foundations for a return to job-rich growth,” he said. “Despite this, unemployment remains unacceptably high, especially among the young, and tackling it remains a top priority.”
Mr Rehn said he believed that government policies have struck the right balance between growth and debt-sustainability concerns and that it is important to maintain the high degree of social consensus.
Additional reporting: PA