INTERNATIONAL CREDIT ratings agency Standards & Poor’s has attempted to defuse the controversy surrounding its comments about the Government’s ability to lead Ireland out of recession.
S&P director of European sovereign ratings Frank Gill told The Irish Times he had not meant to question the State’s leadership when he spoke early yesterday of the need for “new faces in Government”.
He said: “It is not about leadership. It’s about the enormity of the challenge and the uncertainty of what’s going to happen with the banking system in particular.”
Mr Gill was commenting after the agency had been accused by senior political figures of an inappropriate intervention in Irish politics.
In the Dáil yesterday Taoiseach Brian Cowen queried what the experts from the ratings agency knew about Irish politics, while Labour Party deputy leader Joan Burton said the composition of the Irish Government was not the business of a “foreign ratings agency”.
Former taoiseach Garret FitzGerald questioned the timing of the S&P intervention, saying the agency would have been wiser to wait until after next Tuesday’s budget to make its judgment.
In its report downgrading the Irish economy, published on Monday, SP said it was “concerned” that a “credible” strategy would not emerge until after the next general election.
Explaining these comments on Newstalk radio early yesterday, Mr Gill said: “In order for there to be a buy-in into what are going to be inevitable tax hikes in order to stabilise the debt-to-GDP ratio, you are going to need new faces in Government . . . This is typically the case in the aftermath of an economic crisis.”
Yesterday evening, he told The Irish Timesthis statement was meant to indicate the "enormity of the challenge" facing the Government and was not meant to question the State's leadership. "There needs to be a credible plan for the public finances," he added. "It doesn't matter who implements the plan."
It was estimated yesterday that the agency’s downgrading of Ireland’s credit worthiness would cost the Irish taxpayer in the region of €500 million this year and up to €1 billion in a full year in borrowing charges.
“The analyst made the point that the probability is that a change of faces behind the Cabinet table is needed to restore trust, integrity and confidence in the Irish financial institutions and the Irish Government. The €500 million question is: what is the Taoiseach’s view of that,” Fine Gael leader Enda Kenny asked Mr Cowen in the Dáil.
“I have no comment on the gentleman from the credit rating agency other than to note that his job concerns credit rating. I do not know what he knows about Irish politics or what the choices are,” Mr Cowen said.
Ms Burton also asked Mr Cowen how much the Government estimated that the downgrading would cost. She questioned the appropriateness of some of the analysis.
“I listened with some astonishment to the gentleman from Standard Poor’s commenting on the composition of the Irish Government. That is not any business of a foreign rating agency.”
She added that she was one of the people who had been calling for the rating agencies to be reformed.
The Taoiseach told the Dáil that the exchequer figures for the first quarter, which are due to be published tomorrow, will show that the decline in tax receipts evident in January and February had continued.
“I have also stated that the tax revenues this year, in the absence of corrective action, would be some €3 billion less than forecast in January and as put forward by the Minister for Finance,” said Mr Cowen.
The unemployment figures for March, which are due to be published today, are expected to show a significant increase on the February figure of 352,800.
However, the February rate of job losses at 1,000 a day is believed to have slowed somewhat during March.
The Cabinet will meet again late this afternoon to consider the options facing it in Tuesday’s budget.