Troika headmasters confirm their model pupil is getting a good report

 

COMMENT: Accentuating the positive is understandable – everyone needs to make the bailout work

YESTERDAY AFTERNOON the mission chiefs of the three teams of technocrats overseeing the State’s EU-ECB-IMF bailout briefed the press at the end of their two-week stay here.

The troika men stressed again and again how the rescue was going to plan, just as they did at their end-of-trip briefings in April and July. This mantra was echoed during a joint briefing earlier in the day by Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin.

The accentuation of the positive is understandable – everyone needs to make the bailout work. Ireland needs the credibility of meeting the terms of the rescue; Europe needs a bailed- out country to make progress and prove that austerity-based programmes can work.

The worse things get in Greece, the more an Irish (and/or Portuguese) success is needed. Being a model pupil (and an utter contrast to Greece) gives the Government more leeway than might otherwise have been the case. The troika does not want an unsightly row that would signal yet another bleeding wound to the weakened euro project.

There was no sign yesterday that troika trio were putting their feet down with the Government.

One issue where room for manoeuvre may be increasing is the size of the adjustment in the forthcoming budget. Yesterday Noonan said he would not be taking the advice of the independent Fiscal Advisory Council – last week it urged a €4.4 billion adjustment in 2012. That would seem to put a ceiling on a cuts-and-taxes package of €4 billion next year.

During the briefing yesterday afternoon Istvan Szekely, the European Commission’s man in charge of his institution’s Irish bailout, said “substantive discussions on possible measures” had taken place and the focus had been on measuring how much the Government’s proposals would save. No hint at all that the commission wanted more front-loading of the adjustment.

Ajai Chopra of the IMF was effusive in his praise of the fiscal council’s reports, which had earlier been rejected by Noonan.

If that gave the impression that Chopra agreed with the council and disagreed with Noonan, he went on to add that nobody was “fixated on a hard figure”.

Does that include the European Central Bank? It has consistently been the most fiscally hawkish of the troika institutions, and yesterday the bank’s man – Klaus Masuch – pointed out that some areas of public spending were still well above levels just five years ago. He went on to note that the tax take (relative to the size of the economy) was low. On both spending and taxing, he said there was plenty of scope to do more, but – crucially – only if necessary.

Privatisation may be another issue on which the Government is gaining leeway. In September the IMF explicitly called for a privatisation programme to raise €5 billion. No more.

Yesterday, cash targets were downplayed. Szekely said the money-raising aspect of privatisation was less important than the efficiency gains of having the private sector operate in areas where there was “no need for Government involvement”.

Besides, he stressed, it was impossible to be sure how much could be raised from selling off a given portfolio of assets. In short, he said privatisation was not a “game-changer” for Ireland, owing to the relatively small size of State-owned assets compared to other countries.

If this is objectively accurate, the Government’s continued talk of not wanting “firesales” of State assets is nonsense. A firesale happens when fire-damaged goods are deliberately offered for sale at much reduced prices so they can be off-loaded quickly.

The sale of ESB’s electricity generation capacity, for instance, would not be a firesale. It could be put on the block and bids from around the world entertained. The Government would be under no obligation to sell if it felt the price was not right. Talk of “firesales” should stop.

Notable yesterday was the absence of any protest outside the European Commission’s offices on Dawson Street, where the briefing was held. In July a group of protesters waved placards and made some noise. This time, there was not a banner to be seen.

Despite the proximity to another painful budget, the absence of any demonstration may suggest that whatever anger there once was at the troika has dissipated. If that is the case it must be at least partly attributable to the deliberate manner in which its frontmen have conducted themselves.

Masuch is so soft-spoken as to be often barely audible, while Chopra is well known for his comfort in the limelight. Neither fits the picture of an “economic hitman”, described in a book in 2004 by someone who had spent a career interacting with officials from international organisations such as the IMF.

Nor does Szekely, who very conspicuously plays the lead role in the troika briefings. He shows his human face by personalising issues. Yesterday, when raising Ireland’s alarming rates of youth unemployment, he spoke of how his two kids are soon to enter the world of work. Like any father, he worries about their prospects. That teed up his point – the troika may in the future be looking more closely at the Government’s response to the jobs crisis.