Noonan to argue for rate cut


Minister for Finance Michael Noonan will begin pressing the case for reducing the interest rate on Ireland’s €67 billion EU-IMF rescue package when EU finance ministers meet in Budapest next week.

This would form the first step of what Taoiseach Enda Kenny described as a “diplomatic onslaught on Europe” following the publication of banking stress tests this week.

Department of Finance sources said yesterday that Mr Noonan was expected to discuss interest rates at the informal Ecofin meeting in the Hungarian capital on Friday and Saturday.

“He [Mr Noonan] will be explaining the results of the stress tests and the actions that the Government is going to take,” said one source. “Debt sustainability is important. Running down the interest rate can help that.”

The Minister for Social Protection Joan Burton said Ireland should be facilitated by Europe in return for not touching senior bondholders. “We should now get a quid pro quo in respect of two items. The first is a reduction in the interest rate and the second is a renegotiated long-term debt package,” she told The Irish Times.

Senior teams from the International Monetary Fund, the ECB and the European Commission will arrive in Dublin on Tuesday to conduct the first and second quarterly reviews of the package.

The IMF team will be led by its European deputy director Ajai Chopra and the teams from the troika are expected to stay in Dublin for at least 10 days. The two reviews had been merged to accommodate the holding of the general election and the completion of the stress test.

The teams will review the operation of the programme to date along with senior Irish central banking, treasury and Government officials.

“Some targets will be changed because of changed circumstances since last November,” said one Government source. “Obviously the Government will be arguing for some changes to reflect the programme for government. If it wants to change any items, it has given undertakings to find alternative savings.”

Under the terms of the memorandum of understanding signed with the IMF and EU last November, the Government has quarterly targets relating to tax, spending and labour market reform.

The stringent stress tests of the banks’ liquidity and capital, the results of which were announced last Thursday, were among the actions agreed for the first three months of this year.

The former government also committed itself to reducing the minimum wage by €1 an hour, introducing measures to reduce the risk of long-term unemployment and initiating an independent review of registered employment agreements and employment rights orders.

In February, some European officials privately expressed concern about “slippage” in progress on the bank restructuring but the new Government met its target of completing the stress tests by the end of March.

The European Commission said yesterday the stress tests should reassure markets that there would be “no further surprises” from the Irish banks but the ECB warned its continued support for the sector was conditional on the Government executing the EU-IMF bailout deal.

Yesterday, Irish Life and Permanent collapsed in value after it unveiled plans to split the business and sell off its profitable pensions and investments business, Irish Life.