Talks held with Troika on exit from bailout programme

Friday 26 October 2012 11.34
Michael Noonan said a paper would be published before Christmas outlining options for exiting
Michael Noonan said a paper would be published before Christmas outlining options for exiting

Minister for Finance Michael Noonan has said the Government was fulfilling its bailout programme and had its first discussions about exiting it, which is due to happen at the end of next year.

Speaking on RTÉ's Six One News, Mr Noonan said there was no disconnect with the Troika but the difficulties showed the depth of the mess as a result of what happened in the previous Government.

Following the Troika's latest statement on Ireland's bailout earlier, Mr Noonan said that a paper would be published before Christmas outlining options for Ireland exit from the bailout.

One way to assist the country would be a statement from European Central Bank President Mario Draghi allowing Ireland to avail of the bond-buying programme. That would reduce the cost of borrowing.

Speaking to RTÉ News, Mr Noonan acknowledged the financial difficulties experienced by many families and the assistance provided by the Society of St Vincent de Paul.

He said the objective in the Budget was to be fair and to protect the most vulnerable, apart from correcting the deficits and lowering the debt.

He said unemployment was high but things were improving, citing economic growth of 1.4% last year and predicting growth in the region of 0.75% this year.

Mr Noonan said Ireland was working its way out of a situation where the country was absolutely bankrupt with the assistance of colleagues in Europe, who are providing low-cost money under certain conditions.

He said 80% of the available funds have now been drawn down and after next year the Government will try to get back into the markets at low cost.

He said a lot of money, over €5bn, was raised in July when Ireland re-entered the markets but the rates were still too high to allow for complete funding.

Mr Noonan also said the Government wanted the NTMA to continue to keep a lot of funds in its possession so that, if there is a shock in the market, the country would be well-funded for as long as a year and a half.

He said the Troika could still help by providing backstops or comfort blankets to convince the markets Ireland is in a safe place.

In relation to Ireland's bank debt and the possibility of re-entering the markets, Mr Noonan said there is some pricing-in of a deal since June but not full pricing-in, in his view.

He said five-year money was available today at 3.33%, which is affordable and could provide funding but with longer maturity.

He said that if a deal is secured on bank debt the rates would come down further.

He added that if there is no deal, Ireland could still access the markets but at interest rates that would be too high to fund the €10bn deficit in tax revenues and expenditure once the deficit is brought down to below 3%.

In its statement today, the Troika praised Ireland's progress but said significant risks remain, which require determined efforts by politicians.

It also told the Government to sell off State assets to raise cash.

The statement said that, while the banks remain well capitalised and their downsizing plans are progressing well, further efforts are needed to address their profitability and growing level of arrears.

However, the Troika highlighted the unacceptably high level of unemployment, especially among the young, and said job creation and growth remains a key priority.

It also said the Government is ''alert'' to the level of overspending in the health sector.

The EU and IMF have urged the Government to adopt Budget measures that are ''durable'' and ''as growth friendly as possible to minimise the burden of adjustment on the most vulnerable''.

''Intensified efforts'' are required to deal decisively with mortgage arrears and further reduce bank operating costs, the Troika urged.

It said that an orderly phasing out of the ''costly'' Eligible Liability Guarantee Scheme would improve the banks' profits and support lending capacity.

The country is expected to meet its fiscal targets for this year, despite expenditure overruns in some areas, it added.

The Troika said the conclusion of the eighth review would see the IMF releasing €900m in funds for Ireland, while the EFSM/EFSF release another €800m.

EU member states are expected to donate another €500m through bilateral loans.