Making ‘clean break’ from Troika was right course, Kenny says

Taoiseach reponds to fiscal council report and says onus on Goverment to be decisive

Minister for Finance Michael Noonan walks past Spain’s Economy Minister Luis de Guindos and European Union Economic and Monetary Affairs Commissioner Olli Rehn during a eurozone finance ministers’ meeting in Brussels today. Photograph: Francois Lenoir /Reuters

Minister for Finance Michael Noonan walks past Spain’s Economy Minister Luis de Guindos and European Union Economic and Monetary Affairs Commissioner Olli Rehn during a eurozone finance ministers’ meeting in Brussels today. Photograph: Francois Lenoir /Reuters

Fri, Nov 22, 2013, 18:09

Taoiseach Enda Kenny has asserted that the Government took the right course of action in making a ‘clean break’ from the Troika despite its own independent economic advisers recommending the State should have accepted a precautionary line of credit.

Mr Kenny has said that while he has absolute faith and confidence in the independence and integrity of the Irish Fiscal Advisory Council, there was an onus on Government to be certain and decisive and to take decisions in the interest of the country and the people.

Mr Kenny, who was attending the opening of the new Intreo one-stop shop for jobseekers in Loughrea, Co Galway gave his first public comments to the Council’sfindings.

It concluded that the Government should have availed of a provisional back-up and should also have chosen a €3.1 billion adjustment in the Budget rather than choosing a less austere €2.5bn in savings.

Asked did the advice of the council plant any doubt in his mind that the Government might not have taken the right course of action, the Taoiseach said ‘No’, the Government need to be clear in its decisions.

“The Government have absolute faith and confidence in the independence of the Fiscal Advisory Council and the Government as the fiscal body that is ultimately responsible to the Dail has to take all the advice that is put forward,” he said.

Mr Kenny said the council had made a number of observations on assumptions underlying the Budget and the Department of Finance in dealing with that advice, had changed some of its assumptions as a result.

“We have a very good relationship with the Fiscal Council. I might say that that is part of the change that is now evident that we will never go back to the culture of greed and speculation that applied a number of years ago.

“And the Fiscal Advisory Council has an important role in giving independent advice to the Government of the day,” he said.

The five-member council is comprised of eminent economists, all of whom participate on a pro bono basis, and is chaired by Professor John McHale of the economics department of NUI, Galway.

In relation to the Government’s decision not to accept a precautionary line of credit, Mr Kenny said that Mr Noonan and the Government had listened to advice coming from many quarters, both at home and abroad.

“It was made clear to other leaders and to other institutions that this would be a decision taken by the Irish Government for the Irish people.”

He said that among the factors taken into account by the Government were the general economic situation, the €24 billion buffer built up by the NTMA, the “euro buffer zone”, the strong position of exports and the rising confidence that was apparent in different sectors of the economy.

“This was the right time and the right decision for Ireland. ”

Mr Kenny and Minister for Social Protection Joan Burton were in Loughrea to oversee the official opening of the 16th Intreo one-stop shop for jobseekers to have opened in the State so far.

The offices allow jobseekers to have one-on-one interview, learn about job vacancies, as well as get advice on training and upskilling. The Government intends to have 69 Intreo offices opened throughout the State by the end of 2014.

Separately Minister for Finance Michael Noonan has said he welcomed today’s report from the Irish Fiscal Advisory Council, a Government advisory body, which suggested that Irish banks may need more capital.

“[The council is] there to provide independent advice to the Government. Nobody wants the country to go down the primrose path that it was led down by Fianna Fáil and the Greens where there was no contrary voice shouting stop. So we don’t want that to happen any more. Overall their report shows that the Fiscal Council approves of the general thrust of government policy.”

Market reaction to Ireland’s decision to make a ‘clean exit’ from the bailout programme had been positive, the Minister noted, with yields still at around 3.5 per cent.

Both AIB and Permanent TSB had successfully raised private money in the markets this week, he added, noting that both institutions are in effect “surrogates for the state when they enter the markets.”

In its latest assessment of the public finances the Irish Fiscal Advisory Council warned that further injections of capital into AIB, Bank of Ireland and Permanent TSB “might prove unavoidable” .

The council added that given the stressed nature of the State’s finances it would be “desirable” that any additional capital needed be “sourced from the private sector or the ESM [European Stability Mechanism] if possible”.