Government has ruled out second mini-budget

Fri, Apr 27, 2012, 01:00

THE GOVERNMENT has categorically ruled out a second mini-budget after what it has described as the “successful completion” of the latest review by the three international bodies overseeing Ireland’s bailout programme.

At a press conference this morning, Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin said the Government had achieved all the targets set out in the memo of understanding for the first quarter of this year.

The review carried out over the past 10 days by the troika of the EU Commission, the European Central Bank and the International Monetary Fund was the sixth since Ireland entered the €83 billion rescue programme in November 2010.

Mr Noonan said the better-than-expected national deficit figures for 2011 – at 9.4 per cent of gross domestic product, ahead of the 10.1 per cent predicted – meant that the Government was well placed to meet its 8.6 per cent target for 2012.

“It’s a lot shorter a road to travel. I think any talk of any problem in meeting 8.6 per cent is not accurate. Somebody got the wrong end of the stick last night with speculation about a mini-budget. The speculation about it is wrong ... We are ahead of profile.”

In addition to new arrangements agreed for Permanent TSB, both Ministers said there had been a “significant policy breakthrough” on growth and jobs.

Mr Howlin said a greater percentage of the €3 billion raised from the sale of State assets would be used for job creation than the one-third agreed with the troika three months ago. He would not say the exact figure as he said it was subject to negotiations.

Mr Noonan said: “In the new memo there is a great emphasis on growth and jobs. We see that as a significant policy breakthrough. It lines us up with the emerging trends in Europe where growth and jobs are a central part of the programme.”

Mr Howlin said the EU and IMF officials had agreed there needed to be a focus on stimulus and job creation, and to that end had agreed that more than a third of the proceeds of State asset sales could be used for stimulus purposes rather than debt-reduction.

Asked about comments by ECB president Mario Draghi last week that it would not change the terms of the €30 billion Anglo Irish Bank promissory note, Mr Noonan said Mr Draghi was repeating the bank’s policy position. He did not agree that it meant the matter was now closed.

“The troika position is that they will continue to engage with us. Ireland needs further initiatives to ensure the long-term sustainability of its debt situation. The best way of dealing with that is alternative arrangements under the promissory note.”

He did not think it would be ready for the European summit in June, but said he hoped a technical paper on the matter would be ready for the working party from Ecofin (the EU’s finance ministers) looking at the issue.

The Ministers challenged two assertions by Sinn Féin in recent days. The first was its claim that under the new budgetary rules under the fiscal treaty the State would have to find an additional €6 billion to meet the 0.5 per cent of GDP structural deficit target.

Mr Noonan said Sinn Féin was correct in the respect there would be a structural deficit target, but said it was a fallacy to say that the only way to deal with it was by cuts. Growth, as well as measures already under way to reduce unemployment numbers and to reform public service pensions, would reduce the structural deficit.

He also said Sinn Féin’s second claim that Ireland could veto the ratification of the European Stability Mechanism (the permanent fund for financing countries in difficulty) in the event of voting No was a fallacy. “The ESM does not require Ireland. The rules for ratifying it are that if a number of countries providing up to 90 per cent of the funds ratify it, then the ESM is ratified [irrespective of other countries not ratifying it].”

It was also confirmed at the conference that economic growth projections for 2012 would be revised downwards by the Department of Finance from the 1.3 per cent forecast in December’s budget.

Mr Noonan said for the first time in a long time house prices had marginally increased in Dublin in March, by less than 1 per cent. Ireland was on track to re-enter international markets as set out in the bailout programme.