After a bruising election, Michael Noonan’s return to the Department of Finance is seen as a signal of fiscal continuity.
The new Government has signed up to a big spending package, but that comes with an overarching pledge to comply with stringent budget rules. Sooner or later, this will necessitate slippery trade-offs with the Independent TDs who have backed the minority administration.
Thus it will to fall to the Minister of Finance – and his Fine Gael colleague Paschal Donohoe in Public Expenditure – to ensure there is no swerve off course.
Having made a virtue of budget probity in the long march to restore order in the public finances, Noonan’s next term in Merrion Street presents an opportunity to consolidate that progress.
The sense that he would do nothing to tarnish his legacy in the department provides some comfort to financial markets that the ascent of Independents will not lead to profligacy in the next budget.
At the same time, financial market participants were quick to note a changing stance on banks in the new programme for government. The incoming administration will take “all necessary action” to tackle high mortgage rates, and no more than 25 per cent of the nationalised AIB will be sold by 2019.
“If you think about departures from previous policy, banks are the one area that really stand out in the document from two perspectives,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers.
“One is the focus – or refocus – on [standard variable rate] mortgages. Second is in relation to what looks like more of a hands-on approach in terms of the banks that the State owns. I think investors will be more concerned about that change of tack.”
Given the messy Dáil arithmetic, however, it is not quite the same victory lap that the veteran Limerick TD might have anticipated.
He is blamed by many in Fine Gael for the confusion over the “fiscal space” which marred its election campaign.
“There are mixed views,” said a Fine Gael source. “There’s quite a significant group of people who feel that he’s past his sell-by-date and that it’s time to move on. However, people close to the Taoiseach and the Government Ministers recognise that he remains a master political practitioner, and is extremely useful in the current environment.”
