Reports show frustration at glacial pace of reform
Words such as ‘staggering’ and ‘bottleneck’ reveal the troika’s dismay
The Dublin anti-austerity march organised in February by the Irish Congress of Trade Unions. “It beggars belief that five years into austerity any government needs to be pressured by outsiders to do something which could save hundreds of millions of euro annually without pain for citizens.” Photograph: Dara Mac Dónaill
When the EU-IMF troika first arrived in Dublin at the end of 2010, prospects for a successful bailout were considered better than those of Greece, then the only other euro zone country to have required an international rescue.
Ireland’s resort to aid from the international community had its origins in sins of omission (mainly the failure to regulate banks properly and manage the public finances prudently) rather than in the sins of commission in Greece (systemic corruption and proactively bad policy decisions over decades which hobbled the capacity of the economy to function efficiently).
The absence of linguistic challenges and the decent team-working capacity of the senior layer of the Dublin civil service were further contrasts to the challenges faced in Athens.
But over time, as the foreign technocrats from Brussels, Frankfurt and Washington DC have more closely observed how the Irish political and administrative system works, frustrations have crept in. The “implementation deficit disorder” that marks Ireland out among its peers in northern Europe has become increasingly apparent to those who oversee the bailout.
This week, the assessments of the two members of the troika which publish quarterly reports – the International Monetary Fund and the European Commission – have come into the public domain; the latter’s published yesterday and a leaked version of the former’s obtained by this newspaper on Tuesday.
Although frustrations with the pace of reform implementation were particularly marked in the commission’s report, both organisations are critical of the sluggishness in dealing with problem mortgages.
Progress on resolving non-performing loans is described by the IMF as “inadequate”. Its report notes that the banks have “only begun to tackle” the problem. The commission’s leaked draft report (the final version of which, it should be noted, is subject to change) described progress as “slow” and said the banks “had made very little use of loan modification options”.
On helping the unemployed get back to work, both institutions highlight the too-little-too-late approach to modernising the archaic system whereby a person can be in receipt of unemployment benefits for many years without ever meeting a case officer who could provide help in getting back to work.
For the commission, this issue “dominates” the structural reform agenda and needs to be addressed “forcefully” – strong language for such a report. It states that the capacity of the Department of Social Protection to “deliver services to the long-term unemployed is becoming the critical bottleneck . Fast progress and closely linking training programmes to labour market needs are now essential ” (my italics).
Sense of urgency
The IMF was scarcely less urgent in its tone. Speaking from Washington yesterday, the mission chief for Ireland, Craig Beaumont, said that even when the planned doubling of case officers is achieved, their number relative to the numbers unemployed will still be low compared to peer countries.
To drive home the point, the IMF noted that when those who are underemployed are added to the number formally unemployed the total stands at a “staggering” 23 per cent of the labour force. (It is very unusual for an organisation such as the IMF to use words as dramatic as “staggering”.)
On tackling healthcare over spending and wasteful spending, the commission commented dryly that targeted savings under the Croke Park agreement “had been counted upon in the context of the 2012 budget, but in the event failed to materialise”.
The troika has obliged the Government to complete a study by the end of June on drug costs, prescription practices and the use of generics in Ireland and comparable EU jurisdictions. An end-September deadline has been imposed for the setting of annual targets for increasing the share of generic drug usage, along with measures to ensure targets are met.
It beggars belief that five years into austerity any government needs to be pressured by outsiders to do something which could save hundreds of millions of euro annually without pain for citizens.
Other frustrations in the commission’s report include: “significant uncertainty [that] still surrounds” the implementation of water charges; “further delay” in the enacting the legal services Bill; and the provision of “only limited information” from the Government on how privatisation receipts could be used to boost employment.
For anyone with a patriotic bone in their body, the arrival of the troika in November 2010 was a personally felt humiliation. But the technocrats have been a much-needed antidote to the State’s chronic implementation deficit disorder. As such, their departure at the end of the year is cause for concern.
Without external pressure, what is the likelihood that the Coalition will revert to the default position of the political system – to implement as little reform as possible and do it as late as possible?