Ireland completes bailout exit but Noonan warns 'we can't go mad again'

Monday 16 December 2013 10.27
Brendan Howlin and Michael Noonan gave a press conference on Ireland's bailout exit
Brendan Howlin and Michael Noonan gave a press conference on Ireland's bailout exit

Minister for Finance Michael Noonan has said Ireland has successfully completed its European Union/International Monetary Fund bailout, becoming the first eurozone member state to do so.

Speaking at Government Buildings, Mr Noonan said: "This isn't the end of the road. This is a very significant milestone on the road." 

The International Monetary Fund has tonight disbursed Ireland's final bailout tranche, $890m.

In a statement, the IMF said: "With today's approval of the 12th review Ireland has successfully completed its EU-IMF supported program.

"Steadfast policy implementation by the Irish authorities has underpinned the achievement of core program objectives: stabilising the financial sector, significantly improving the fiscal position, and regaining market access.

"Renewed job creation and a range of positive indicators signal an emerging recovery. As a result, Ireland is now in a much stronger position than when its program began."

It added: "Yet Ireland still faces significant economic challenges. Unemployment is too high, public debt sustainability remains fragile, and heavy private sector debts and banks' slow progress in resolving non-performing loans weigh on domestic demand.

"Continued concerted policy implementation is therefore necessary for Ireland to recover fully from the crisis."

Earlier, Mr Noonan warned that "we can't go mad again".

He also added that the Government must continue with the same types of policies, as the country's deficit is still too high. 

Mr Noonan said the real heroes of the past three years are the Irish people who have seen taxes increased and services cut.

He said the Government's dual objective is to grow the economy and create jobs.

"The people who suffered most are those who lost their jobs", he said.

Minister for Public Expenditure and Reform Brendan Howlin said that the fortitude and forbearance of Irish people throughout the programme has been commendable.

He said there were times when the Government had concerns about whether Ireland would reach the end of the bailout programme.

"We have much greater control of our own destiny into the future and that is a huge testament to the fortitude and forbearance of the people of Ireland, who rolled up their sleeves and understood that a job of work had to be done to put things right for themselves and for their children."

Ireland's economy in graphics 

Taoiseach Enda Kenny said Ireland's exit from the bailout on Sunday was an important moment for Ireland and its people.

Mr Kenny said that if Ireland's growth targets are achieved over the coming years the benefits of this will be filtered out to hard-pressed families.

Mr Kenny also said that the banking culture in Ireland has not changed sufficiently, and that there are still some difficulties with the banking situation.

Mr Noonan this afternoon confirmed that there will be an examination of the point at which single earners begin to pay the higher rate of tax. 

He said the IDA believed that this could be blocking foreign direct investment.

Mr Noonan said the point at which earners begin to pay 41% tax is lower in Ireland than in many other countries.

Minister for Social Protection Joan Burton said the higher tax rate kicked in at a low point for single earners.

Mr Howlin said both parties in Government would like to see some easing of the burden on hard-working families.

Responding to questions about possible changes to tax, he said the Government would be prudent in its decisions and the prime focus was to grow the economy.

However, he said the Government hopes to be in a position to ease the burden on taxpayers by 2015.

Mr Howlin said the budget deficit would be reduced to 3% of GDP by then, and the Government would like to be able to "reward people" at that stage.

Speaking on RTÉ's News At One, Mr Howlin said Budget 2014 was already in place, so there could be no taxation measures within the next 12 months.

"We've set out the budget for next year, and that will be challenging enough. I don't see certainly any tax changes in advance of next year's budget."

But he said it was a view shared by both parties in Government that hard-working families "had taken a big smack" in the past number of years, in additional taxes and costs, and they deserved a break.

Mr Noonan said the Government would be conscious of the sacrifice people had made.

But he added that the Government would be motivated primarily by how tax can best be used as an instrument of economic growth and job creation.

Milestone on the road to recovery - Gilmore

Tánaiste Eamon Gilmore has said the exit from the EU/IMF bailout is a milestone on the road to recovery.

He said it has been achieved through the sacrifices and hard work of the Irish people.

Mr Gilmore said the next target for the Government once it exits the bailout is full employment.

Burton in call for tax reforms

Earlier, Ms Burton said the Government had had an "up-and-down relationship" with the Troika.

She added that there should be room for tax reform after Ireland's exit from the bailout.

The minister said tax relief should be directed at lower and middle income earners.

Her remarks were backed by Mr Noonan, who said he would be examining the issue.

European Commission president Jose Manuel Barroso congratulated Irish citizens and the Government on exiting the bailout programme.

He said their determination together with the support of the other EU member states, European institutions and the IMF, means Ireland can finance itself.

Mr Barroso also said that the European Union is creating rules to ensure that debt cannot be accumulated like it had been by Ireland's banks.

The bailout programme formally expires on Sunday night, the third anniversary of the approval of Ireland's application by the IMF board.

Over that time there have been four-and-a-half months of meetings with Troika officials, 260 programme actions completed and €67bn borrowed.

The country has fewer, smaller banks. The yield on Government bonds is now at 3.5%, down from a peak of 14.5%.

'Extensive external surveillance' to continue

Fianna Fáil finance spokesman Michael McGrath described Ireland's exit from the bailout programme as a significant milestone for the country.

However, he warned that there are significant challenges ahead for the economy.

He said the country will continue to be subjected to "extensive external surveillance" by the Troika and by other international parties to ensure that the economic recovery beds down and takes root firmly.

Sinn Féin finance spokesperson Pearse Doherty said that while the Troika will be leaving Ireland, the Troika mindset remains firm in Government Buildings.

Speaking on RTÉ's Morning Ireland, Mr Doherty said he believed there would be more austerity heaped on the Irish public in the next budget.

He said that people who had suffered under austerity would be asking what the real difference will be for them, after Ireland exits the bailout.

Mr Doherty said the resources the country has should have been used to get the economy back on track, instead of providing money to failed banks.

He said what Sinn Féin has argued for is what Europe now accepts - that senior bondholders should have been burned.

"The problem is that, from our point of view, that we didn't have a government at the time that was willing to stand up for Irish interests.

"Instead what they did is they bowed down on bended knees to the European diktat.

"They bailed out the banks and unfortunately over the three years it was the Irish people that suffered."

'Not out of the woods yet' - Rabbitte

Minister for Communications, Energy and Natural Resources Pat Rabbitte said there is a psychological advantage to being out of the Troika programme, but that the country is "not out of the woods yet".

Also peaking on RTÉ's Morning Ireland, Mr Rabbitte said it was an uncertain world and growth was uneven in the eurozone.

Responding to questions about Ireland's bank debt, Mr Rabbitte said the debt was "challengingly high".

He said there had not been burden sharing and said Ireland had taken "a hit for the team" by helping to prevent the spread of contagion to European banks.

He said the European Central Bank prevented senior bondholders from taking a proportional share of the hit, and the country now had a moral authority behind its case for some amelioration of the debt burden.

EU Commission Vice-President Olli Rehn has said, in retrospect, the decision to introduce the blanket bank guarantee by the then government was a mistake.

However, he said it was now "water under the bridge".

On RTÉ's Prime Time last night, Mr Rehn spoke for the first time of his shock when he was told about the scale of Ireland's banking debt.

He said he was made aware of the seriousness of the banking problem by the then minister for finance Brian Lenihan in September 2010.

Reacting to the impending end of the bailout programme, ICTU General Secretary David Begg said the Troika was a disaster and wreaked havoc on Ireland.

He said it is great to be rid of it and that the ICTU view has always been that budget adjustments should have taken place over a longer time.

Read Business Editor David Murphy's blog on the bailout here.