Taoiseach defends fiscal treaty

Mon, Feb 6, 2012, 00:00

The Taoiseach has denied that Ireland’s acceptance of the fiscal compact agreed by EU leaders last week will condemn the State to further years of austerity.

Enda Kenny also rejected the suggestion that Ireland had lobbied the European Union to draft the text of the fiscal compact in a manner that would avoid a constitutional referendum in Ireland.

The compact, agreed at special EU summit last Monday, proposes tough new budgetary discipline on each euro zone state, including near-zero public deficits.

In a radio interview yesterday, Mr Kenny predicted Ireland would experience growth, not recession, once the EU-IMF bailout package came to an end. He also indicated there were protections, including financing, available to countries after they emerged from bailout programmes, that acted as a buffer from an immediate need for correction or austerity.

“Ireland signing up to this is not consigning itself to a programme of austerity for the future,” he told RTÉ radio’s This Week programme.

Mr Kenny said the fiscal compact, if ratified, would not affect Ireland for the next two years as the State’s bailout programme with the EU and International Monetary Fund “supersedes the fiscal compact”.

“We set out the reasons also why countries emerging from a programme like ours will continue to receive funding if that’s necessary,” he said.

Twice in the course of the interview he referred to funding being available to programme countries which had emerged from bailouts, raising the prospect of a possible contingency fund, or even a second programme, from 2014. However a Government spokesman said later the Taoiseach was stating the facts of what was contained in the fiscal compact text, including protections for “programme countries”.

The Taoiseach was determined the Government exited from the programme at the end of 2013 and there was ‘no desire’ to be in a position to avail of additional funding,” the spokesman added.

Mr Kenny was speaking as talks continued in Athens over a planned second bailout for Greece. Negotiations to conclude the long-delayed €130 billion plan broke up without final agreement last night as top European figures warned of dire consequences for Greece if it failed to quickly sign up for the new rescue.

“If we were to establish that everything has gone wrong in Greece, there would be no new programme, and that would mean that in March they have to declare bankruptcy,” said Luxembourg’s prime minister Jean-Claude Juncker, chief of the euro zone finance ministers.

Greek leaders have baulked at EU-IMF-ECB troika’s demand for a 25 per cent cut in private sector pay and a 35 per cent reduction in some pensions as a condition for further aid. However, euro zone finance ministers warned the government on a weekend conference call that there was no scope for flexibility.

“The sense was that they should stop messing around,” an EU official said of the Greek negotiators.

In the This Week interview, Mr Kenny said for states including Ireland to reach the deficit of 0.5 per cent of GDP set out by the fiscal compact, the European Commission “would work with each country on an individual basis” to determine the timescale and the means.

“They are matters of a very complex technical nature. It is not a one-size-fits-all.”

However, when pressed in the interview on whether Ireland had insisted on the text being designed to obviate a referendum in Ireland, he said “not at all”.

The Taoiseach emphasised again there would be no firesale of State assets. However, he agreed that those considered suitable for disposal would need to be sold by the end of 2013, as that is when the bailout programme would come to an end.