Minister for Finance Michael Noonan has said there have been four significant revisions to the four-year rescue programme for Ireland being underwritten by the European Commission, the ECB and the IMF.
He said the revised memorandum of association would incorporate the new Government’s major jobs initiative; a reversal of the €1 cut to the minimum wage; no further transfer of assets from banks to the National Assets Management Agency; and the acceptance of the Government’s comprehensive spending review to be completed by the autumn.
At a news conference at Government Buildings in Dublin today, Mr Noonan said all of the conditions set down by the troika for the first quarter of 2011 were assessed by the 30-strong mission from the three international bodies to have been met.
Mr Noonan also said he would now be in a position to take up the issue of the interest rate that Ireland is paying to the two EU funds at the meeting of European finance ministers next month.
“We made significant progress on the interest rate meeting in Budapest. We will take that up at the finance meeting in May,” he said. “The process is that technical officials will come up with a joint narrative on this. It’s a work in progress.”
Mr Noonan and the Minister for Public Expenditure and Reform Brendan Howlin were speaking at a news conference this morning at which key details of the revised memorandum of understanding (MoU) between the Government and EU-IMF were released.
Under the new deal, the minimum wage is to be restored to €8.65 an hour from €7.65 as pledged by the Coalition in its programme for government. The measure was agreed in conjunction with a 50 per cent reduction in employer’s PRSI on the tranche of income up to the minimum wage, aimed at boosting the ailing jobs market.
The revised document also specifically refers to targeting sheltered sectors of the economy – a reference to the pharmacy, legal and medical professions – to lower costs and make competitive gains.
It also refers to the review of Joint Labour Committee structures setting out pay rates, terms and conditions, for workers in other sheltered sectors of the economy.
Mr Howlin said this review was not linked to the minimum wage. “Equally, we are looking at lawyers and the medical profession. There have been barriers in the past that have [resulted in] a loss of competition,” he said.
Mr Noonan said the inclusion of the jobs condition had resulted in “a lot of new conditions” in the revised MoU. He would not be drawn on what those conditions were or the overall cost of the fund for the jobs initiative, other than to say it would be “fiscally neutral”.
He said the Government would announce those details when the jobs initiative was announced at the end of May.
Giving his overall assessment of the outcome of the two-week negotiations, he said there were certain aspects of the programme that the Government disagreed with. “We wanted to drop the conditions we disagreed with and replace them with proposals we have in the programme for government,” he said. “That went very well. The [troika] was very complimentary to us for being decisive and taking these decisions early on. It complimented the bank restructuring.”
Asked about the jobs initiative, Mr Noonan said it contains a lot of new conditions. “It would be premature to announce them today. The jobs initiative package will be agreed and will be announced in May.”
He said that the EU-IMF mission had agreed with the Government’s argument that the transfer of loans worth less than €20 million to Nama should not now take place and the banks themselves would take responsibility for deleveraging those assets.
Many of the sub €20 million loans related to developments like “a small housing estate in Letterkenny or a block of flats in Tuam”, he said.
“In terms of servicing the debt and deleveraging, Europeans did not have the concept that it was so scattered and not so centralised as they thought. When that was explained to them, they agreed.”
Mr Howlin said the Coalition has made a “series of important and real decisions” since it has been in government. He said the troika had accepted and endorsed the action that it has taken.
“We know that this is a work in progress. One of the things that was important was to establish a relationship with people who are going to be part of our landscape for the next little while,” he said.
Mr Howlin said the targets set out in the Cork Park deal had “by and large” been achieved to date, but said that €1.4 billion in savings was required. He said the next review, to be published next month, would give the best snapshot of how much further the Government need to go.
The memorandum provides that if the targets are not met, the Government must broach the matter of further pay cuts in the public service.
Mr Noonan said the jobs initiative might also encourage people to spend their savings. “[Savings in Ireland] are comparatively high internationally and historically very high. If people can be encouraged to spend savings we will get a bit of vibrancy back in the economy,” he said.
Mr Noonan said he was not unduly concerned about differences between agencies on short-term growth in the economy. He said he was more concerned about the medium-term forecasts which were more consensual and still put growth at between 2.5 per cent and 3 per cent.