Chopra says IMF is pushing for more European support for Irish recovery
THE HEAD of the International Monetary Fund mission to Ireland, Ajai Chopra, has said his team has been pushing for Ireland to receive “additional European support that goes beyond the current set-up”.
Mr Chopra also repeated a call made by IMF managing director Christine Lagarde for Europe’s bailout structures to be changed so that they can “bypass sovereigns” and take direct stakes in struggling financial institutions, adding that it “could make a world of difference”.
Asked if this meant there was disagreement among the members of the so-called troika on how to deal with Ireland, Mr Chopra said the IMF did not want to be “too prescriptive” in telling the European Central Bank and the European Commission what to do.
“Europe has its own decision-making process. I think they’re aware of the issues,” he said.
“It’s not for us to be prescriptive in the precise type of support. I think we’ve given general indications of these things. What I would mention is that we’ve had long-standing suggestions on how to strengthen the common financial stability architecture in Europe and that remains very much on the agenda,” he continued.
In his assessment of Ireland’s progress since the IMF-EU bailout was approved in December 2010, Mr Chopra said the experience had been positive so far but that high risks remained.
“We have a number of positive elements but we also have some areas of concern,” he told journalists gathered at IMF headquarters in Washington DC for the fund’s annual spring meetings.
“On the positive side ... programme targets are being met, policy implementation on all fronts has been very good, reviews have been completed on time and you see this in the spreads that Ireland has relative to the spreads of the other programme countries.”
However, he said the burden of household debt, declining house prices and uncertainty about Ireland’s future were contributing to a continued lack of domestic demand, which posed risks.
“If we did have a scenario where domestic demand did not pick up, and there were external shocks and that constrained export growth, and let’s say growth got stuck at around a half per cent, you would not then have debt stabilising; it would continue to go up,” he said. “So the basic point ... is that risks are high. It all comes back to growth.”
Mr Chopra mentioned several times in his presentation that Ireland’s problem was fundamentally a banking crisis, which was caused by a “bloated financial system”, unlike Greece and Portugal, where irresponsible fiscal policies had resulted in unsustainable debt levels.
He also made a pointed reference to the fact that the repayment of senior, unsecured bank debt had caused “considerable resentment” in Ireland.
“The view is that the Irish taxpayer has had to bear a disproportionate burden in maintaining pan-European financial stability,” he said, without further elaborating.
Mr Chopra’s presentation was part of a euro area crisis seminar at the IMF and World Bank annual spring meetings. The meetings are being attended by Central Bank governor Patrick Honohan and Robert Watt, secretary general of the Department of Public Expenditure and Reform.
Presentations were also made by the heads of the IMF programmes in Greece and Portugal. While there was praise for the progress being made in Portugal, Poul Thomsen of the IMF’s European Department said he was not sure the Greek programme would succeed if tax administration did not improve.
“This is the key issue and the key one where we have failed so far,” he said, referring to the problem of tax evasion in Greece.