Coalition pursuing debt reduction policy of up to €20bn, says Noonan

THE GOVERNMENT is seeking an overall reduction of €15 billion to €20 billion in its burden of debt, Minister for Finance Michael Noonan has said.

In an address to the Institute of International and European Affairs in Dublin on “Ireland in Europe”, the Minister said a medium-term process was in place with the European Commission and the European Central Bank on the issue.

“We want the overall burden of debt to be reduced and this is the argument we will use when we are talking about the promissory note in Anglo Irish Bank,” he said. “But that’s an example to get the issue on the table in Europe and we’re open to suggestions from them as to other means of reducing the overall burden of debt.”

The Minister said that while the State’s situation was sustainable, he would prefer it if the overall debt was reduced by €15 billion or €20 billion “going back into the markets in 2013”.

He said this phase of renegotiation was more a medium-term project but the Republic had set up its negotiating positions and Europe was engaging with us.

“They haven’t said they will cut the debt yet. But they are engaging with us and preparing policy papers,” he said.

While it was not possible to say what would happen, he could say that there was a process in place which may lead to the State getting its overall burden of debt lowered by some mechanism which will be identified.

He said last week’s agreement in Brussels was a leap forward and not just yet another instalment.

On the Greek situation, Mr Noonan said he would keep his comments to general terms only by saying that what is needed is a return to stability, certainty and the avoidance of contagion.

“We’re all in this together; we’re all attached to the same rope, as I’ve said before. That being said, we are not the same as Greece. We are resolutely facing the challenges and taking decisive action.”

He said that throughout the crisis, many of the strengths and advantages of the euro have been overlooked. It should be remembered that, since its introduction, the euro had increased trade by 50 per cent, had controlled inflation and had allowed for the deepening of a successful internal market across the EU.

Mr Noonan said the latest figures showed that gross domestic product increased by 1.6 per cent in the second quarter of the year. This followed on from a relatively robust expansion in the first quarter – so the Irish economy was growing once again.

The Minister said the recent European Banking Authority capital exercise showed that Irish banks do not need additional capital.

Speaking to reporters on his way in to giving the address, Mr Noonan said financial institutions in the Republic should decide to pass on the 0.25 per cent interest-rate cut by the European Central Bank to mortgage-holders.

“I’m very pleased that they have announced it . . . I think the European economy could do with the injection of a three-quarter per cent rate cut between now and early in the New Year.”

He said the fiscal statement to be published by the Government today “will give certainty and it will provide a framework and a background against which people can make their own decisions”.