Ireland meets all bailout targets
The troika of international lenders has concluded that Ireland has successfully fulfilled its obligations in the seventh review of the bailout programme but noted concerns about budget over-runs in the health sector.
At a press conference Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin said the country was halfway through the four-year programme and had met all conditions required to date by the European Commission, the ECB and the IMF.
However, the Government has been asked by the troika to introduce measures to address the emerging spending over-runs in the health sector, and to specify those before the end of September.
Mr Howlin disclosed the €200 million plus over-run in the HSE had been discussed with troika officials during negotiations but said the importance of this issue in the overall scheme of things should not be exaggerated.
He said the over-run came to 2 per cent of the health budget of some €15.4 billion and expressed confidence Minister of Health James Reilly would address it.
Mr Howlin said Mr Reilly had been “proactive” in tackling the matter.
In his comments, Mr Noonan said three elements were needed to bring the deficit down and the budget back into balance; increased taxes, reduced spending and economic growth.
He expressed confidence the target of reducing the deficit to 3 per cent of gross domestic product by 2015 would be met and said this year’s budgetary figures were on track.
Mr Noonan said the Budget would be held in the first week of December and a little over €2 billion of the €3.5 billion savings target would come from expenditure cuts, with a further €1 billion plus coming from tax increases and other revenues.
He said the Budget would be helped by a tax carryover from 2012.
Mr Noonan said reducing the burden of bank debt was essential if the economy was to recover.
He said repaying the interest on the loans would result in a drag on growth rates. He likened it to driving a car with the handbrake on.
“The real test is getting back into the markets. We need a sustainable debt position. We need to continue driving the deficit lower,” he said.
Mr Howlin said the most daunting task the Government faced was reducing the number of long-term unemployed. He said while the signs were good, difficult choices and decisions were required.
He pointed to positive IDA figures for the first six-months of the year as signs of growing confidence.
Mr Noonan declined to specify the portion of the €64 billion in bank debt he would like to get written down, saying the request would be "ambitious".
Asked if he was aiming for an total Government deficit of 100 per cent of GDP (a 17 per cent drop, or some €34 billion), he replied: “Economists will say if debt is over 100 per cent you are getting into difficulty.. . that it will impact adversely on your growth rates. You will have a semi-stagnant economy even though your are maintaining your payments.
“We want to get it down in the first tranche [of refunded debt]. If we got the full €64 billion it would be down to 80 per cent of GDP. Where it ends up I cannot predict.”
Both Ministers said they were sticking by a Programme for Government commitment that said income taxes would not be increased and basic social welfare rates would remain unchanged.