Bruton backs IMF view on programme

The president of the International Financial Services Centre John Bruton has backed the International Monetary Fund (IMF) in its support of the Government’s actions in implementing the financial programme agreed as part of the EU-IMF bailout.

Speaking this morning at the European Insurance Forum in Dublin, Mr Bruton said Ajai Chopra – the most senior fund official dealing with the Ireland brief – had noted that an increase in Ireland's corporation tax rate was not part of the deal, as it would not be consistent with the goal of sustaining growth.

"I am confident his words will have caught the attention of the French minister for finance, Christine Lagarde who, as an EU Finance Minister, endorsed the EU/IMF programme in the first place. She will also have noted that Irish corporation tax receipts had "overperformed", in the IMF's words, and are thus contributing more, not less, than expected to Ireland's loan repayment capacity," he said.

Mr Bruton has previously said he was sure Ireland's 12.5 per cent corporation tax rate would remain unchanged.

Support is mounting for Ms Lagarde to head the IMF, after Dominique Strauss-Kahn stepped down. Mexico is offering its central bank governor as an emerging-market candidate, challenging Europe's 65-year hold on the job.

Nations from Australia to Brazil are urging a selection determined by "merit" rather than nationality, and Banco de Mexico Governor Agustin Carstens offered a veteran IMF candidate for emerging markets to rally around. Developing countries have so far shown little evidence of coordination, with Thailand, Russia and South Africa supporting policy makers from their own parts of the world.

The IMF, which provided a record $91.7 billion in emergency loans last year and accounts for one-third of the euro-region's bailout packages, has promised transparency in the selection process, saying that by the end of June it will choose the most qualified candidate.

This morning, Mr Bruton also spoke out against talk of defaulting on debt.

"Those who talk lightly of default and restructuring by Greece should pay attention to what that would do to Greek banks. It would destroy the collateral that those Greek banks use to borrow from the ECB, and this would lead to an overnight loss of confidence in those banks, with disastrous and sudden consequences for Greek savers, and for its entire economy," he said.

"The truth of the modern European economy is that we are all tied together, and we can either keep one another afloat, or drag one another down," he added.

"I believe that the EU will have to move closer together politically, if we are to survive economically. The politics of this is just as important as the economics. People in all EU countries, rich and poor, need to feel a sense of ownership of the European Union."

He warned that strong, democratic political institutions would be needed to face any future crisis.

Additional reporting: Bloomberg