Troika dishes out feel-good factor as it insists debt burden is sustainable

Dan O'Brien

Economics Editor

(From left) European Commission spokesman Amadeu Altafaj, Klaus Masuch of the ECB, Istvan Szekely of the commission, and the IMF's Ajai Chopra in Dublin yesterday to announce details of the review of the Government's economic programme. Photograph: Dara Mac Dónaill

COMMENT: THE TROIKA’S third Dublin press conference since November’s EU-IMF bailout was the dullest yet despite the euro-wide crisis backdrop against which it was taking place.

“No target has not been met,” said the Hungarian technocrat from the European Commission who took centre stage. Istvan Szekely’s comments on Ireland’s adherence to the terms of its bailout were echoed by his colleagues from the European Central Bank and the IMF.

Half a year into a three-year bailout, they emphasised their view that the plan was on track. This was the conclusion they reached having spent the past week assessing the degree to which the Government has been restructuring the banks and implementing the reforms set out in the plan.

Among the few newsworthy points made by the trio yesterday was Szekely’s response to a question about how burning Greek sovereign bondholders might change the terms of a second Irish bailout if it were needed. Could a second bailout be given without some form of writedown of debt? He said that it would be “reasonable to draw that conclusion”.

Apart from the surprise that he was even prepared to discuss a hypothetical second rescue package, the implication of Szekely’s response was that the commission thinks that giving more funds over a longer period is more likely than any form of default even if market re-entry is not achieved on schedule. Ireland is not Greece, according to the commission, now or in the future.

The ECB’s Klaus Masuch hammered home the point, saying that Ireland’s debt burden was sustainable.

If the ECB man said exactly what his bosses say every time default is mentioned, he was not the emotionless central banker when championing the role of his institution in Ireland. Unsolicited, and sounding hard done by, he took issue with the criticism of the bank that has appeared in the media here, stressing the massive amounts of cheap money the ECB has made available to the Irish banking system.

He went on to note that no other country in the 17-member single currency bloc had received such disproportionate support.

The ever-smooth Ajai Chopra of the IMF had a well-prepared script. His five-point message was upbeat: there are signs of growth returning; bank restructuring continues apace; fiscal consolidation is ongoing; competitiveness is being regained; and the Government is implementing the measures it needs to extract itself from the mire.

If it were not for contagion from Europe, confidence in Ireland would be stronger now than in the recent past, he claimed. His evidence: positive market reaction for a couple of weeks after the announcement on March 31st of massive bank recapitalisation.

He over-egged his pudding. Europe’s problem has been repeated cross-contamination among the peripherals, with the whole zone becoming weaker with each outbreak.

The only hint of discord came when Chopra felt obliged to repeat his organisation’s criticism of the wider European response to the crisis. Echoing his “Irish solution to an Irish problem” description of the bailout the last time he was in Dublin three months ago, he urged a European solution for a European problem.

The IMF has long been frustrated by the underwhelming response of euro governments to their sovereign debt crisis. With Europe edging closer to allowing that situation to spin out of control, that frustration has never been more warranted.

Rumours doing the rounds all week of an impromptu leaders’ summit being convened today in Brussels were finally scotched yesterday. There will, at the very least, be more days of frustration before a sigh of relief can be breathed.

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