Government confident of bailout exit next year
THE GOVERNMENT has said it is working on a strategy with the European Union to exit Ireland’s rescue programme at the end of next year without a second bailout.
The two key Ministers dealing with the troika of international lenders marked the end of the eighth quarterly review of the programme yesterday by saying the emphasis of all parties had now shifted to ensuring Ireland was the first programme country to re-enter sovereign bond markets.
Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin both gave an upbeat assessment of how Ireland had performed in the two years since the European Commission, the European Central Bank and the International Monetary Fund began overseeing the Irish economy.
In contrast, the troika raised more concerns about risks and programme implementation during next year than in previous reports on Ireland’s progress.
In a statement, it praised the “steadfast” performance of the Government in meeting targets but also highlighted a number of “significant risks” and concerns for next year that it implied the Government needed to address urgently.
These included overruns in the health sector.
It also described unemployment, especially among young people, as “unacceptably” high and was critical of job activation programmes, which it said needed to be more vigorous, and needed also to involve the private sector.
It also referred to the critical issue of mortgage arrears where it said “intensified efforts” were required.
Speaking at a press conference in Government Buildings, Mr Noonan disclosed that the European Union was working on a paper that would be ready by Christmas outlining the options Ireland could take during next year to exit the programme.
He also set out key political aims that would ease Ireland’s passage back into the international bond markets.
These included a deal on the historic cost of recapitalisation, and also a statement from ECB president Mario Draghi that Ireland could avail of the ECB bondbuying programme before exiting the bailout.
Mr Noonan said such a statement could reduce the interest on Ireland’s longterm borrowing by up to two percentage points.
One option, he said, would be to raise €17 billion next year to put 18 months of sovereign funding in place and then to maintain that reserve.
That would insulate Ireland from unforeseen events or systemic shocks, he said.
Mr Noonan said he was very confident Ireland would exit the programme by the end of next year “in all circumstances”, irrespective of getting relief on the historic cost of bank recapitalisation.
Mr Howlin pointed out that Ireland had drawn down 80 per cent of the €67 billion loan from the troika and had fulfilled 160 conditions.
“We are the most successful programme country. We have hit all the targets,” he said.
Separately, a highranking member of Germany’s central bank warned against using Europe’s nascent banking union to deal with “past sins”.
Andreas Dombret, a Bundesbank executive director, argued in an interview with The Irish Times against the ESM fund taking on legacy banking assets.
He insisted he was not trampling over Irish hopes for debt relief but said people should be “particularly realistic” about what was doable or not.
“Mutualising the risks from legacy assets could well overburden partners – fiscally or politically – and you should not do that,” he said.
“Nobody wants to dash any hopes. Everybody wants Ireland to stay on track and get over the crisis and be successful.”