Memorandum sets out detailed conditions of EU-IMF loan deal
THE GOVERNMENT will have to account for itself in detailed quarterly reports setting out the economic, policy and legislative proposals it is adopting in return for the EU-International Monetary Fund bailout.
Draft documents setting out the arrangements were published yesterday by Minister for Finance Brian Lenihan in a surprise move before the end of the Dáil debate on the bailout. The documents commit the Government to providing all the information requested by the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF). The Government is committed to consulting these bodies on any policies not consistent with the agreement.
In an interview with The Irish Times Mr Lenihan stressed last night he was in good health and able to do his job. He expressed the view Brian Cowen would lead Fianna Fáil into the forthcoming election.
Mr Lenihan said officials in his department were already working on the Finance Bill and he expected it would be ready by mid-January.
Mr Lenihan rejected the claim the interest rate being paid by Ireland for the bailout was too high and he said Greece was now looking for the same terms. He said there were different rates from the three funds. The European facility was 6.05 per cent, the commission 5.7 per cent and the IMF was also 5.7 per cent.
The draft memorandum, which will give legal effect to the rescue deal, runs to 40 pages. Included are letters of intent sent jointly by Mr Lenihan and governor of the Central Bank Patrick Honohan to the European authorities and the IMF.
In the letters, it is conceded the Government stands ready to implement further austerity measures beyond the €15 billion in the four-year plan, if the stringent quarterly targets set out by the EU-IMF in its three-year programme are not met.
The letter to IMF managing director Dominique Strauss-Kahn, states: “We stand ready to take any corrective actions that may become appropriate for this purpose as circumstances change. As is standard under fund-supported programmes, we will consult with the fund on the adoption of such actions.”
The targets set out in the documents include budget adjustments of €6 billion, €3.6 billion and €3.1 billion respectively in the next three budgets. A total of €6 billion in social welfare and public sector cuts, including pensions, will be required.
In detailed conditions for each quarter until the end of 2013, the memorandum specifies property taxes must be introduced in 2011 and the transfer of water service provision from local authorities to a water utility must be advanced before the last quarter of next year. Other changes include a Bill to increase the retirement age, measures to cut legal and medical costs, and significant cuts in social welfare payments.
There is a stipulation that very detailed monthly, quarterly, and weekly financial, banking and fiscal data be provided to the commission, the ECB and the IMF. In all, some 22 sets of data will be disclosed, encompassing almost all the information normally available only to the State. The data includes monthly updates on adherence to budget targets; quarterly data on the public service wage bill and employees; weekly information on the Government’s cash position; a weekly statement on the assets and liability of the Central Bank; and monthly financial stability indications by the Central Bank.
The Government has committed itself to “consider an appropriate adjustment” in the public sector wage bill, if the Croke Park agreement does not deliver.
By the end of next year, the Government will undertake an “independent assessment” of the electricity and gas sectors. When complete, the authorities will set targets for their possible privatisation. The Government has withheld from publication a side letter agreed with the EU and IMF outlining confidential measures for the banks and tax changes to be included in Tuesday’s budget.