A MEMO recommending the sale of State assets will be considered by the Cabinet, possibly as early as next Tuesday, following agreement from the EU-IMF troika that a “sizeable” portion may be used for jobs stimulus.
Minister for Public Expenditure Brendan Howlin announced yesterday that there had been a breakthrough on this issue during discussions with the EU Commission, the European Central Bank and the International Monetary Fund as part of the latest review of Ireland’s €67.5 billion bailout programme.
Mr Howlin said the troika had moved from a position where it had insisted the funds could be used only to reduce the country’s debts to a position where it agreed that a portion could be used to create employment.
“We made progress in that regard. We will have sizeable quantities of money available from assets that we can apply to new jobs,” he said during a joint conference with Minister for Finance Michael Noonan on the outcome of the review.
At a later press conference, the EU Commission seemed to play down the concession. Its head of mission Istvan Szekely said plans had to be finalised about the use of cash from the sale of State assets.
“We would like to understand their plans for asset sales and I understand this is in the process,” he said.
Government sources insisted last night that Mr Howlin’s comments had been approved by the troika beforehand. While Mr Howlin refused to be drawn on the extent of asset sales, or the proportion to be used to fund jobs, it is understood the more the Government sells, the higher the proportion of funds available for jobs creation.
In its programme the Government set an upper threshold of €2 billion but now looks more likely to approve more than €3 billion in disposals, including part of ESB. A report prepared by a special group included Dublin Port, shares in Aer Lingus, and parts of Bord Gáis and Coillte in its list of recommendations.
The troika, in its summation, said the Government has met the terms of the €67.5 billion programme so far but that the country faced “considerable challenges” and must implement policy measures.
The Government also claimed significant progress with the troika on the contentious €30.6 billion of promissory notes, or State IOUs, which are being used to fund the cost of Anglo Irish Bank and INBS. A further €16.8 billion in interest must be paid on the loan.
Mr Noonan last night described the promissory notes, with their punitive interest rates, as “abominable”. He said the troika would present a position paper by the end of February.
“What we are working on is an alternative to the promissory note that will reduce the costs to Ireland,” he said. A source said it would mean an extension of the term or a drop in interest rates, or both.
A number of deadlines for the introduction of new legislation and plans for the banking sector have been deferred.
Legislation to reform the personal insolvency regime and a restructuring plan for Irish Life and Permanent (ILP) have been deferred until the end of April, with ILP recapitalisation put back to June.
Stress-testing of Irish banks (the PCAR) has also been deferred from March to November.
The troika highlighted challenges including the weaknesses of domestic demand, high unemployment and an economic slowdown in some of the main trading partners.
As a result, its growth forecasts for the economy had been cut from 1 per cent to 0.5 per cent – just over a third of the Government’s forecast. It still expects the 8.6 per cent budget deficit for 2012 to be met.
Mr Noonan, for his part, said there was no reason to resile from the Government’s own growth prediction.
The ECB again ruled out forcing losses on senior unsecured and unguaranteed bondholders as it would damage confidence in the Irish banking system and could be “very costly”. Anglo is due to repay a €1.25 billion senior unsecured unguaranteed bond next Wednesday.
Mr Noonan said the fiscal consolidation targets had been met by a significant margin, in tandem with the first return to growth in 2011 for three years.
The troika said the Government had delivered a budget deficit of 10 per cent for 2011, significantly ahead of programme targets.
Mr Howlin said the troika was sensitive about the €5 billion in the National Pension Reserve Fund and regarded it, in some sense, as “collateral”. This signalled that some or all of this fund may not be available for Government programmes.
Fianna Fáil finance spokesman Michael McGrath said the real economic test was the number of people on the Live Register. Sinn Féin’s Pádraig Mac Lochlainn said the latest review showed austerity was not working as a policy.
