EU-IMF says austerity charges must be shared 'fairly' by all

PUBLIC OPPOSITION to the household charge is a timely warning to the Government to ensure Ireland’s reform burden is “fairly and equitably shared”, according to the EU-IMF troika.

Its latest report warns of a “still fragile market sentiment to Ireland”, urges quick action on personal liability legislation reform and calls for the sale of State assets, including Aer Lingus, by early 2013.

Beyond its focus on economic targets and risks, the report notes the risk to the reform programme posed by a loss of public support.

“The difficulties experienced in the implementation of the new household charge . . . provide a reminder of the risks that the popular support for continued consolidation and reform might wane, especially if growth remains weak and unemployment high,” said the report, seen by The Irish Times.

“In order to minimise this risk, it is essential that the burden of the necessary consolidation be fairly and equitably shared.”

Ireland’s reform programme, due to run until the end of 2013, remains on track according to the review, the troika’s sixth, which was distributed yesterday to members of the Bundestag parliamentary committee in Berlin.

Approval of the report by programme partners will release a further €3.7 billion from the EU-IMF and €500 million from a UK bilateral loan. This brings the external aid received to €52 billion or 77 per cent of the total programme.

The report was based on a visit to Dublin in April by the troika of the European Commission, European Central Bank and International Monetary Fund. In it, they maintain their focus on economic targets, but make several nods to the agenda for jobs and growth being discussed in European capitals.

The report identifies a list of continued risks faced by Ireland until the scheduled close of its programme at the end of 2013 – from continued weakness in the domestic housing market and growing non-performing loans. These could have serious consequences for banks’ financial health and trigger a knock-on effect on public confidence.

Confidence in the Croke Park agreement is underlined but the latest report promises to keep Ireland’s public pay situation under review.

“Should the desired savings not materialise it would be prudent to consider taking additional measures,” the report notes, such as revising some pay scales and cutting non-core pay and allowances.

It queried whether cutting staff rather than pay levels risked “jeopardising the delivery of public services”. While accepting Government assurances that staff would be hired to fill resulting gaps, the troika insisted all new employees “be subject to the reformed pension regime, whose parliamentary approval should thus be secured as a matter of priority”.

Meanwhile, the Government yesterday released a letter Taoiseach Enda Kenny sent to German chancellor Angela Merkel, European Council president Herman Van Rompuy and other European leaders in the after of the fiscal treaty referendum.

In the letter of June 7th, Mr Kenny appeals for political support and a “constructive debate” on the challenges of resolving the Irish and wider European banking crisis.

“From here on, we must avoid the mistake of allowing banking crises in individual countries develop into sovereign crises in those countries and beyond, by way of contagion. Ireland has painful experience of that approach,” Mr Kenny said.

“We have made some progress, but we are still seeking a viable outcome that enhances the market perception of our long-term sovereign debt sustainability.”

A Government spokesman said there would have been “some more specifics” in Mr Kenny’s phone call with Dr Merkel after the referendum. He rejected what he described as Opposition calls for the coalition to reveal the detail of its negotiating strategy.