State must keep finances prudent, says ECB official

‘Ireland has potential to be the fastest-growing euro zone country in 2015’

Benoit Coeuré: Ireland must avoid spending money it does not have

Benoit Coeuré: Ireland must avoid spending money it does not have

 

A senior European Central Bank policymaker has urged the Irish authorities to avoid spending money in future budgets “that is not yet there”.

Benoit Coeuré, ECB executive board member, said Dublin should be as conservative as possible in its fiscal stance and the government after the next election should maintain “continuity” in economic policy. Mr Coeuré reiterated the ECB will not be participating in the banking inquiry but said informal engagement with the Oireachtas was possible.

Ireland has a potential to be the fastest-growing euro zone country in 2015. That’s clearly a recognition of the success of the adjustment programme,” he told The Irish Times in an interview.

“A lot has been done obviously, but when the economy bounces back in any country there is always a risk of being over-optimistic and of spending money that is not yet there.

Stave off risk

Mr Coeuré also urged Irish banks to tackle more of their non-performing loans, saying this was a priority. “I would certainly encourage banks to be very forthcoming in addressing non-performing loans, in using their buffers to accept losses when they restructure loans and I would also encourage borrowers and lenders to engage directly, not waiting to go to court to settle,” he said. “It’s an investment to recreate capacity to lend into the economy. It’s also for the benefit of all so it has a social purpose.”

He said the ECB was keen to see continued implementation of labour market activitation programmes to help unemployed people find jobs.

Mr Coeuré, who worked in the French treasury when the Irish bank guarantee was issued in 2008, pointed to reservations in Paris and Frankfurt at the move. “First, that the decision, that the blanket guarantee on deposits was not the right decision to take. This was also the ECB’s view because it created issues elsewhere in the euro zone.

“And second, that there was high financial stability risk, that there were contagion risks which justified a very careful look at these burden-sharing issues, so I think that the view was not different in Paris.”