IMF 'on call' to help Ireland

International Monetary Fund managing director Christine Lagarde has said there is “clearly good news on the horizon” for Ireland.

Speaking at a press conference in Government Buildings with Tánaiste and Minister for Foreign Affairs Eamon Gilmore and Minister for Finance Michael Noonan, Ms Lagarde said Ireland was one of the few countries in the euro zone showing positive growth numbers.

“There are results around the corner. While it has been very hard there is clearly good news on the horizon,” she said.

Ms Lagarde said the IMF had been on the side of Ireland “through the toughest times” and would “stay available and on call”.

She said the imperative was helping Ireland exit its bailout programme successfully.

"We have an open mind about many issues, many of the terms and conditions, if you will, of the exit strategy," Ms Lagarde said. "We will look at all the options available."

She said those options would have to be within the IMF's mandate and that its rules prevented it from extending the terms of Ireland's bailout loans, a concession that is currently being discussed at European level.

However, she reiterated that Europe should do all it can to assist the return of Ireland and fellow bailed out country Portugal to financial markets, not limiting its help to just extending loans under their EU-IMF bailouts.

Later, Ms Lagarde said Ireland needs to focus on include fixing the country's banks, the former French finance minister said, adding that while a huge amount of work had been done, more was required to ensure the sector is put on a solid footing.

She also warned that Ireland's still-high unemployment rate of 14.2 per cent risked fraying the social fabric in a country where social upheaval has been limited.

"In too many places across Ireland, people are becoming increasingly demoralized, disengaged and disenchanted," Mr Lagarde said in a speech at Dublin Castle. "There is a real risk of a fraying of social fabric, a breakdown of communities, of people losing faith in the system so we need renewed efforts to help these people find jobs."

She also said the European Central Bank has room to cut interest rates as the euro-area economy remains mired in recession. "Monetary policy should remain accommodative," she said in a speech. "We believe that there is still some limited room for the ECB to cut rates further."

Ms Lagarde said she expects the region's economy to remain in recession this year. The ECB forecast yesterday that the 17-nation economy will contract 0.5 per cent in 2013 instead of the 0.3 per cent projected three months ago.

On International Women’s Day, Ms Lagarde said Irish women were doing better than some of their colleague in the euro zone but she still had concerns about lower salaries and low participation. She said she would encourage Mr Gilmore and Mr Noonan to make sure women were included and respected. Turning to Mr Noonan, she said: “I know that this gentleman respects the views of women.”

Mr Noonan had earlier thanked Ms Lagarde for her assistance at meetings when he was an “inexperienced” Minister for Finance.

Ms Lagarde also said she supported gender quotas on a time-limited basis. She said she had seen them work and said they were necessary to “kick-start” the process of increased female involvement in politics.

Ms Lagarde’s visit comes after the European Central Bank called yesterday on the Government to step up its banking reforms, with bank governor Mario Draghi urging “further action”. Mr Draghi was speaking as Central Bank figures showed that while the pace of growth in mortgage arrears is slowing, about 23,500 mortgages have not been paid for two years or more.

John Moran, secretary general of the Department of Finance, told the Public Accounts Committee that the level of repossessions in the Republic was “uncharacteristically low” but that banks should soon be able to “move forward” on tackling problem home loans. The Republic has a repossession rate of about 0.25 per cent of mortgages, compared with 3 per cent in the UK and up to 5 per cent in the US.

“It’s surprising to us that there are so few repossessions in the system at the moment, given the extent of the crisis,” Mr Moran said. “Ultimately, it is the other people in the country who are paying for these people to stay in their houses.”

Speaking in Frankfurt after the ECB’s governing council meeting, Mr Draghi praised Ireland for its economic progress but said the banking sector was a key concern. “The Irish Government has undertaken very, very significant progress, very significant results on several fronts... but further action is needed, especially on the banking side, in the financial sector,” Mr Draghi said.

Ahead of her visit, Ms Lagarde told The Irish Times she was concerned about a “relapse” in the global economy. She also said she wanted to see where Ireland is as it nears the end of its bailout programme.

“I want to understand where the country is – which from the reports I read is a good position – with a programme that is more than on track, with growth that has turned positive for the first time and exceptionally so in comparison to other European and euro area countries,” she said. “I want to see how we, with the authorities, can best plan for finishing successfully the programme and to make sure that there will not be a relapse.”