EU and IMF accept Government proposals that differ from terms of rescue package

 

SENIOR OFFICIALS from the IMF and the European Union have raised no objection to the Coalition’s programme for government although it contains proposals that run counter to the conditions in the €85 billion rescue package agreed with the previous Fianna Fáil-led government.

Minister for Finance Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin yesterday met Ajai Chopra, the European deputy director of the IMF, the ECB’s chief economist Klaus Masuch and Istvan Szekely, a senior official with the European Commission.

The meeting, which took place at the invitation of the new Government, lasted almost two hours.

Speaking after the meeting, Mr Noonan and Mr Howlin said the “troika” of bodies had agreed in principle that the conditions laid down in the memorandum of understanding agreed last November could be changed to accommodate the new programme for government as long as the overall targets remained unchanged.

“There are flexibilities as long as the overall envelope is the same for the Government to make the policy choices we have outlined in the programme for government,” he said.

Mr Noonan said the details of the changes would have to be worked out when the officials from the IMF and EU return to Ireland in April for the first quarterly review of how the memorandum is being implemented.

“They have agreed to that principle. The detail of the change will be discussed subsequently. What’s taken out and put in must have the same fiscal effect,” he said.

Mr Noonan, when asked if the officials found any aspect of the programme unacceptable, replied: “No, if there is, they have not said it.”

The Minister also said he did not believe the Government’s decision to restore the minimum wage to €8.65 would create difficulties – a reduction of the minimum wage to €7.65 was one of the conditions of the memorandum.

“I don’t think the minimum wage will be a problem. But what we were discussing was the fact that the troika accepts that we are meeting the fiscal targets over the period in Government and they have endorsed that approach,” he said.

Mr Howlin said that one of the first targets of the memorandum was missed when the previous government delayed transferring €10 billion for bank recapitalisation.

He said the recapitalisation was contingent on the results of the stress tests of the banks, which will be complete on March 31st. He said that once that happened, Mr Noonan would bring his proposals to Government.

Mr Noonan agreed that more than €10 billion may be required but said he did not know “at this stage” how much more was needed. In relation to the restructuring of finance into two separate departments, Mr Howlin said the IMF and EU had expressed no opinion on it.

He said the division between the fiscal, taxation and banking side on the one hand, and the expenditure and public service management side, had happened from the moment of the appointment of the two Ministers.

“It’s entirely co-operative and is working extremely well. There will be requirement for legislation, to create the new department.

“It’s done elsewhere. It’s the model in other countries and I think the partnership we have already forged in working on the programme for government and previously in Cabinet is a good augury.”

In a short statement issued later yesterday, the IMF said the meeting was an opportunity to hear the views of the new Government on its economic programme.

“The discussions covered the economic outlook and the financial sector and are an important input into next month’s review mission [to Ireland],” it said.

The IMF in Washington declined to elaborate on its short statement, but is likely to comment in detail at next month’s review of the memorandum of understanding.

The memorandum provided for quarterly reviews, but the first was postponed because of the general election. As a result, the first and second reviews are being combined and the results will be released in the first half of April.