IMF says Europe has ability to help Ireland

Thursday 18 November 2010 23.12
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Dublin - IMF Delegation is headed by Deputy Director Ajai Chopra (left)
Dublin - IMF Delegation is headed by Deputy Director Ajai Chopra (left)
Dublin - Ajai Chopra leaving the Central Bank this evening
Dublin - Ajai Chopra leaving the Central Bank this evening
Patrick Honohan - Government will have to accept offer
Patrick Honohan - Government will have to accept offer

The International Monetary Fund has said it has not received a request for financial support from Ireland and that Europe has ample ability to help the Government cope with the debt crisis.

It confirmed a team of its officials was en route to Ireland and planned to begin work tomorrow morning to assess what may need to be done to assure financial stability.

IMF spokeswoman Caroline Atkinson said any package would not ignore the potential impact of cuts on the least well-off.

The spokeswoman said mission chief Ajai Chopra had already arrived in Dublin.

The rest of the team - likely to number ten to 12 and include banking experts - was on its way, she said.

Representatives of the IMF, the European Central Bank and the European Commission will discuss Ireland's four-year budgetary plan and the restructuring of the banking sector.

Central Bank Governor Patrick Honohan has said he expects the talks will result in a loan being offered to Ireland.

Speaking on RTÉ's Morning Ireland, Mr Honohan said the negotiations were not about a bailout, but would lead to a loan of tens of billions to Ireland, and that the Government would have to accept it.

'The intention is and the expectation is, on their part and personally on my part, that negotiations or discussions will be effective and a loan will be made available and drawn down as necessary,' Professor Honohan said.

He said he did not see the visit as a 'worrisome' event or something that would lead to a change in the Government's direction on the economy.

The Governor also said the IMF and ECB would not bring a big technical team to Dublin if they were not sure that a plan could be designed and agreed for the Irish economy.

Professor Honohan said the interest rate charged on any loans from the IMF/ECB will be roughly in line with previous IMF loans, but says the issue is complicated.

On the banks, he said the huge amounts of money put into them already have not yet generated sufficient confidence on international markets.

He said the banks will use any IMF/ECB money as contingent funding, which can be shown to international investors but does not have to be used.

The funds can be used as a buffer and come back out when they are not needed, as happened in the US in 2008.

Professor Honohan said there have been substantial outflows of deposits from the banks since April as large investment funds and institutions, which had invested in the Irish banks at the height of the economic boom and when the country had an AAA rating, decided to pull out when we lost that rating.

But he pointed out that all this was replaced by borrowings from the ECB. He said the banks have the facilities to deal with these outflows of money.

'No question of loss of sovereignty'

This afternoon, Taoiseach Brian Cowen said the Central Bank Governor is entitled to give his view of the outcome of talks with European officials and the IMF.

However, he said his responsibility is to get the best possible outcome for the country and taxpayers.

The Taoiseach said there was no question of loss of sovereignty for Ireland as a result of the talks.

He added that he did not believe there was a reason for people in Ireland to feel ashamed or humiliated.

The talks are about stabilising the euro, he said, and dealing with serious market conditions that were affecting all countries.

He said the Government's main interest was the protection of the taxpayer. He denied he was talking in riddles and said he is discharging his job responsibly.

Former Taoiseach John Bruton said it was a sad day that Ireland would not now be making its decisions without someone looking over its shoulder.

Mr Bruton said he wanted to remind other countries that Ireland's low corporation tax policy dated back to before the formation of the EU.

Meanwhile, British Prime Minister David Cameron said he did not want to 'speculate' about Ireland's position when he was asked by MPs today about the likelihood of a bilateral bailout.

Speaking to the Commons Liaison Committee, Mr Cameron said: 'I don't want to rule things out, but I don't think we should be speculating.'

He added: 'In any event if these things were to happen one would want to have an early discussion in the House of Commons.'