AFTER ALL the pre-election promises to renegotiate bailout terms, create jobs and secure better economic days ahead, there were slim enough pickings on offer yesterday when Fine Gael and the Labour Party provided limited details of their revised memorandum of understanding with the EU and International Monetary Fund.
The basic message was one of reassurance to the domestic and international markets: Ireland had met its fiscal and restructuring commitments for the first quarter; Ireland was entitled to draw down agreed funding and Ireland was making good progress. But, like visitors around the bed of a patient on life-support, voices were subdued, even if the tone was positive.
Having been rebuffed at head of state level, when it sought a reduction in interest rates and to burn senior bondholders, the political reality is that scope for change in the MOU was always going to be limited. But Minister for Finance Michael Noonan made the most of what had been achieved in talks with the EU-IMF troika. The Government had received approval for modifications to the previously agreed plans for restructuring and recapitalising the banks and for reducing State spending, including a comprehensive review of public spending.
There would be no Nama Two. They would reverse the cut in the national minimum wage. And a programme for job creation had been accepted. The troika had also accepted the Government’s decision to force burden sharing on subordinated debt holders in the banks.
Minister for Public Expenditure and Reform Brendan Howlin was more cautious. They had gained “quite a lot” in the talks but remained “in a straitjacket” because of the original bailout terms.
The EU-IMF troika regard the banking crisis as their primary concern and have cut the Government some slack in relation to its political programme. The value of these concessions will become clearer in time.
The jobs creation programme can only be evaluated when details are published next month. In the longer term, a comprehensive review of public spending will feed into the arithmetic for a December budget and will dictate whether the Croke Park agreement is capable of delivering the savings necessary to avoid further public service pay cuts. The Government’s defensive attitude to the bailout – “people argued we could not change a comma of it” – is understandable. But what has been delivered falls well short of what was promised. In the future, the bailout terms may become more difficult to meet because growth in the economy has been less than was anticipated.
Fine Gael based its election programme on an annual growth rate of 3 per cent, while economic growth of less than 1 per cent is expected this year and of 2 per cent next year. A jobs stimulus package may, as Mr Noonan hopes, go some way towards correcting that situation and improving Government finances. Whatever happens, a very difficult and challenging road lies ahead.