Government under Troika pressure on financial safety net
Michael Noonan seeks to ‘engage seriously’ with EU-IMF over post-bailout situation
Minister for Finance Michael Noonan looks at Italian Finance Minister Fabrizio Saccomanni at the European Council building in Brussels yesterday. Photograph: AP.
The Government is facing pressure from the troika to decide by the end of summer whether it will seek a financial safety net to guard against any sudden loss of market confidence after the bailout.
Inspectors from the International Monetary Fund, EU Commission and European Central Bank started 10 days of talks with the Coalition in Dublin yesterday, their second-last mission before the bailout ends in December.
They want the Government to settle before the autumn on whether it will seek a special credit line to be held in reserve after the bailout for emergency deployment.
Central to the discussion is the fact that Dublin would be obliged to sign up to a package of strict fiscal policy conditions if it seeks a new credit line. This may be unwelcome politically, given the Government’s push to break free of the bailout and troika oversight.
In Brussels yesterday for talks with his EU counterparts, Minister for Finance Michael Noonan said he wanted to hear any suggestions the troika had to make.“I would like to engage seriously with the troika on exit strategies to ensure that when we go back into the markets, in a continuous way in the autumn, we stay and get money at low interest rates,” he said.
In question now is whether Dublin applies for aid under the ECB bond-buying scheme or seeks an “enhanced conditions credit line” programme from the European Stability Mechanism permanent bailout fund. Such aid would work like an insurance policy, the aim being to reassure investors that plans are in place to confront any unexpected jump in borrowing costs.
The alternative is for Dublin to go it alone next year when returning to private markets, the idea being to demonstrate maximum confidence within the Coalition that the exit plan is on track. This option is not without risk but has the advantage that there would no policy conditions above the beyond existing obligations to international sponsors.