Debt can be reduced ‘without retrospective recapitalisation’

The country's debt burden can be brought down to a more sustainable level even without retrospective recapitalisation of the banks, Minister for Finance Michael Noonan has said.

He was speaking at a joint press conference with Minister for Public Expenditure Brendan Howlin to mark Ireland's exit from the bailout.

The comments mark a shift from the previous Government position that some relief must be given for taxpayer’s money used to support the banking system.

Irish debt is expected to peak at 124 per cent of GDP this year, and while Mr Noonan said he will still push for retrospective funding from the Eureopan Stability Mechanism (ESM), his latest comments mark a shift in position.

“Without any retrospective or retroactive recapitalisation of the banks, we think we can still get the debt down very, very significantly,” Mr Noonan said.

He said the length of maturities on some loans, as well as a “smoother payment path”, as well as “tapering down”, will help bring the reduce the debt.

He also said that running structural surpluses will also help, but said of retrospective recapitalisation: “Yes, we are pursuing it but it is not the only method we have of making the debt more sustainable.”

Following his interview The Irish Times in which he hinted at future tax cuts, Mr Noonan said tax bands could be adjusted to increase the level at which people start paying the higher rate of tax.

Mr Howlin agreed that this is something that will be looked at by the Government, while saying the time is not right yet for “largesse” when it comes to public spending.

Both ministers said the exit from the bailout is not the end of the recovery process but a significant milestone on the road to recovery.