Troika warns spending controls must be maintained

Friday 08 November 2013 19.12
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Troika completes programme review
Troika completes programme review
Joseph Stiglitz  says it was a "mistake" to burden taxpayers with bank debt
Joseph Stiglitz says it was a "mistake" to burden taxpayers with bank debt

The European Commission, European Central Bank and International Monetary Fund have said that payment of another €0.8 billion from the EFSM and €0.6 billion from the IMF will complete Ireland's bailout programme.

Staff teams from the Commission, the ECB and IMF said after their latest and final review of the economic adjustment programme, that its implementation had been "steadfast".

The Troika noted that Ireland's economy has been growing above the euro area average since 2011, and the country's growth prospects are now strengthening after weakness in the earlier part of the year. 

While Budget targets remained on track last month, the Troika warned that spending control must be maintained - especially in the healthcare sector - to ensure that the 2013 fiscal deficit target of 7.5% of GDP is comfortably meet. 

It said that achieving the proposed savings in health expenditure while protecting core services will require "particular attention". 

''Broadening the revenue base, reforming the health sector and targeting social support towards the most vulnerable would help achieve the further fiscal consolidation needed in a durable and growth-friendly manner," they said in a statement.

The Troika also said that a "durable resolution" of the mortgage arrears problem is needed to reduce uncertainties that continue to impact on economic recovery.

"The introduction of a target regime for arrears resolution has been helpful, but greater efforts are required by
banks to find long-term sustainable solutions for borrowers in genuine mortgage distress," they cautioned.

On unemployment, the Troika said that recent steps to improve employment incentives are "welcome", as are plans for private sector provision of employment services.

Stiglitz warns of "lost decade"

Meanwhile, the American economist and Nobel Memorial Prize winner Joseph Stiglitz has warned that Ireland will experience a "lost decade" as a result of the European Union-International Monetary Fund bailout.

Mr Stiglitz is in Ireland as a guest of the UCD Clinton Institute and the Roosevelt Institute.

Speaking on RTÉ's Morning Ireland he said: "We know that austerity has essentially never worked and why that was not understood by the European leaders is beyond me.

"It was almost a religious notion if you sin so badly you have to feel the pain."

Mr Stiglitz, who won the Nobel Prize for Economics in 2001, said he was astonished at how little protest there was in Ireland following the decision to bailout the banks.

He said it was a "mistake" to burden taxpayers with bank debt.

"The ECB and others wanted to save the banks, so it was a trade off between banks all over Europe and the Irish citizens." 

Asked about the economy's prospects of recovery, Mr Stiglitz said: "Will you get back to the growth path you were on? Almost surely, no.

"Will you get back to where you were with maybe a lost decade? Yes, I think you will. But it will be a lost decade, at least."

"That's the reality that Europe needs to wake up to," he added.