DEFICIT TARGETS:THE EU and IMF lenders to the State say the Government has met the terms of their €67.5 billion programme so far but that there were still considerable challenges and policy measures that had to be introduced.
The troika of the EU Commission, European Central Bank and International Monetary Fund said Ireland faced weak domestic demand, high unemployment and an economic slowdown in some of Ireland’s main trading partners.
Despite halving the 2012 growth forecast to 0.5 per cent – about a third of the Government’s forecast – the troika said there was no reason for further budget changes.
The lenders still expect Ireland to reduce the deficit target to 8.6 per cent of GDP this year – a reduction of 2.75 per cent on last year. The IMF said the Government should avoid increasing austerity measures in case this exacerbated weaker economic growth but said changes could be phased in.
The troika said it was working with banks on measures to resolve loan arrears and modernise insolvency legislation, which will be published by the end of April.
It also said plans were not agreed on how funds from the sale of State assets would be used. This was despite the Government saying it forced a concession from the troika that some of the funds would be used to create jobs rather than reduce debts. “When we see the plans [for asset sales], we will encourage the authorities to be ambitious,” said commission official Istvan Szekely.
“Once we see an ambitious programme there, then we can sit down and discuss matters.”
The commission said the sales were aimed at improving productivity and then at raising revenue, but assets would be sold at “fair value” so “precious” public money would not be wasted.
“Privatisation is a long process,” he added. “It requires certain steps and we are just at the very beginning of this and nobody should expect very quick transactions.”
Asked why unguaranteed bonds at Anglo, a defunct bank, were being repaid, ECB official Klaus Masuch said this was a difficult decision but the banking sector would be negatively affected if they were not repaid. This would be “very costly” and would outweigh benefits from not repaying bondholders.
Mr Szekely said the public sector wage bill was an important part of fixing the State finances but it was up to the Government to decide on specific savings. He added that the Irish people had increasingly realised that the bailout was there to help.
“I am not denying the social consequences of this programme and the difficulties involved. We are fully committed to make further steps there if necessary.”
Mr Masuch said he was impressed by the public’s understanding of the State’s complex economic and financial issues.
“When I come from the airport with the taxi driver, they are often very well informed,” he said.
The latest review allows the Government to draw a further €3.2 billion from the IMF on a €22.5 billion loan and €6.5 billion on the €45 billion loan from the EU.
