Deal 'may not alter' budgetary policy
The secretary general of the Department of Finance, John Moran, speakin at the Trinity Economic Forum in Trinity College, Dublin. Photograph: Aidan Crawley
The secretary general of the Department of Finance has downplayed suggestions that last week's bank debt deal will lead to a major change in the Government's current budgetary policy.
John Moran said that the breathing space created by last week's landmark agreement gave the Government options for forthcoming budgets but did not automatically herald a change in the country's approach to reducing the deficit.
"You basically have a choice with respect to the money that you are no longer spending. Do you spend it or do you actually say we have a country that is spending more than it is earning and we need to get back to paying the bills?"
"And so you shouldn't necessarily assume that just because you are paying €1 billion less in a year that that means you should spend €1 billion, because we are already spending more than we are earning and we need to get that gap together."
Mr Moran, who was speaking after his address to the Trinity Economic Forum in Dublin yesterday, said Ireland's cost of borrowing on international markets would be reduced as a result of the deal. However, he stopped short of saying whether the savings should be spent or not, insisting it was a "policy decision" for the Government.
"There are a number of different options that you could take and there is no perfect answer. We have a plan that we put in place that we thought the economy could absorb a certain level of contraction."
Nothing that happened last week has changed that, he said, and the economy should still be able to handle the level of contraction calculated to balance the books, "should the Government decide to keep on that path".
"There is an advantage in getting to a primary surplus, to get to our 3 per cent deficit quicker rather than later," he said.
"It's a good healthy debate about choices we need to make. What do you do with the extra saving that we didn't' have a week ago? Well it's very helpful to have lots of different views on that so that as the Government tries to make an ultimate decision, they have as much information as possible."
Regarding the circumstances surrounding last week's swift move to liquidate the Irish Bank Resolution Corporation, formerly Anglo Irish Bank, Mr Moran emphasised the need of keeping the plan below the radar.
"You have never heard of the liquidation of a company happening over a week and there is a reason for it: because you want to actually protect the company and put it in that space where litigation can't occur because in fact everybody knows that as soon as you announce we're closing down the business or shutting it, people just run for stuff."