Labour hardens stance on troika €3.1bn cuts plan

Minister for Communications Pat Rabbitte has hardened the Government's criticism of the troika over its insistence on a €3.1 billion adjustment in October's budget, accusing it of moving the goalposts to impose an "arbitrary" target on the State.

At the same time, a group of eight backbench Fine Gael TDs have rejected calls for a softer budget than that demanded by the troika.

Mr Rabbitte said yesterday the EU-International Monetary Fund troika had adopted a “particularly conservative disposition” on this issue that was unsuited to the environment the euro zone finds itself in.

Responding to the calls for savings of €3.1 billion for next year by euro zone rescue fund head Klaus Regling and others, including the Central Bank, Mr Rabbitte argued the Government was adhering wholly to the targets, but expressed as a percentage of gross domestic product (GDP) and not as a monetary figure with no meaning in isolation.

Troika playing 'hardball'
"I am disappointed, to be honest, that the troika is playing hardball on this issue because we have uniquely and alone of programme countries met very difficult targets . . .

“I always understood that it was the deficit figure of 3 per cent by 2015 that was the imperative and we have met our obligations to the troika programme in circumstances where real hardship has been inflicted on some families throughout the country.”

As to the promissory note deal, he said: “If there is breathing space as a result of being ahead of target then the benefit of that should go to productive reinvestment [and not to debt reduction].”

Mr Rabbitte's view is shared by Tánaiste Eamon Gilmore, who has also rejected Mr Regling's stance. Fine Gael at Government level has not demurred from it. But this may put it at odds with eight backbench Fine Gael TDs who have said the Government should stick to the €3.1 billion adjustment sought by the troika economists and rejected calls for a softer budget with a 5.1 per cent GDP target.

In an article in today's Irish Times, the TDs – Eoghan Murphy, Seán Conlan, Paul Connaughton, Pat Deering, Brendan Griffin, Noel Harrington, Seán Kyne and Anthony Lawlor – also say there should be no new taxes next year on earnings from work.

They argue the Government should use its improved fiscal position to borrow for an investment programme.

Although the Fine Gael TDs argue the improving forecasts give the Government options, they say it is important to continue exceeding deficit-reduction targets. Any lessening causes problems and would “delay the return of the public finances to stability”.

Mr Rabbitte said the Government’s last engagement with troika officials “was more difficult than might have been anticipated given our record of compliance . . .

“Because of renegotiation of the promissory note, we have some breathing space and I would have thought we should have used the breathing space to put more people back to work . . . I have not met any Cabinet colleague not committed to meet the 3 per cent by 2015 target. That is the imperative – not some quantum of money that as of July we can’t quantify,” he said.

'Arbitrary quantum'
"The troika are changing the goalposts on the deficit from a fixed [percentage of GDP] to an arbitrary quantum of money," he said.

“It’s a particularly conservative disposition that is unsuited to the environment that the euro zone finds itself in.”