Burton criticises 'casual' talk of default by TDs

MINISTER FOR Social Protection Joan Burton has criticised Opposition TDs for speaking “casually” about defaulting on debts and has said that such a move “is not in any way a soft option”.

She said those TDs should have “the experience of living in a country that defaulted entirely on its international obligations”.

During a debate on the review of the first six months of the EU-IMF deal, Ms Burton said a default on the scale some TDs suggested would mean that the State’s “only line of credit from the outside world would be through the IMF for a period of at least seven years”.

The Dáil would be well served by “a detailed debate on what exactly is meant by default and what the consequences would be for businesses in Ireland, especially small and medium enterprises”, she said, adding that default “can mean different things”.

The Minister said such a move “would have enormous implications on how an existing mortgage, and the interest rates on that mortgage, would be priced”. TDs should “talk to people in Iceland about what has happened there”.

People “have spoken about Russia after the collapse there, as well as Argentina, as possible models. Members of the House who are interested in economies which have defaulted should realise that it is not in any way a soft option.”

Ms Burton also highlighted the need for new structures to deal with sovereign debt given the “complete change in financial markets over the past 10 years where globalisation means a 28-year-old with an MBA is as likely to make a decision about Ireland’s sovereign debt as a senior Minister or ministry official in capitals around the world”.

Minister for Finance Michael Noonan said final approval of the review was expected in mid-May and “the conditions of the programme are being broadly met to date”. The Department of Finance would hold a seminar to “advance the discussion on fiscal reform” and would establish a fiscal advisory council by the end of June.

Michael McGrath (FF) said the Government had now fully accepted the €6 billion fiscal correction for this year, introduced by the previous government. “No changes have been made to that Budget, despite the most trenchant opposition to it in December last from those parties now in government,” he added.

Mr McGrath said it would remain essential that the path of fiscal correction be pursued.

There had been no wholesale renegotiation of the EU-IMF agreement. Any changes had to be fiscally neutral and agreed in advance with the troika, he said.

“There even seems to be some doubt about the reduction in the interest rate that was being negotiated by the previous government on leaving office,” he added.

Pearse Doherty (SF) said it was clear Fine Gael and Labour had signed, sealed and delivered a package they were hell-bent against just eight weeks ago.

“The revised EU-IMF programme of financial support for Ireland is virtually identical in letter and spirit to that agreed by Fianna Fáil last year,” he said.

“Is this the change for which people voted? Is this the promise of a new era of Fine Gael and the Labour Party in government?”

Shane Ross (Ind) said the ECB must have anticipated the emergence and arrival of the new Government with some worries.

“They cannot believe their luck at what has happened,” he added. “The present Minister for Finance and Tánaiste have turned out, in European terms, to be paper tigers.”