THE MINISTER of State for Finance Brian Hayes has said the department had been involved in contingency plans in case there was a break-up of the euro or the establishment of a two-tier euro.
Speaking at a business conference in Dublin, Mr Hayes said that “contingency planning is part and parcel of every government department, particularly the Department of Finance”.
Asked what the plans involved, the Minister joked: “It is a bit like someone says in a middle of a war, ‘If I told you that, I’d have to shoot you’.”
The October 26th plan to save the euro was “comprehensive” and the task now was “to get on and implement it”, he said.
Mr Hayes told the Irish Association of Corporate Treasurers conference that the necessary infrastructure around a single currency, including crisis management measures, had “never really been put in place and now we’re engaged in a retro-fitting exercise”.
The Minister said the sale of a 35 per cent stake in Bank of Ireland to a Canadian-led group of private investors was “probably the most important message in this economy this year”.
Donal Donovan, a member of the Irish Fiscal Advisory Council, said he expected Greece to “stagger on possibly, though not probably, outside the euro area” and that the currency bloc could survive if Greece left the euro area but not if Italy left.
The markets had over-reacted to political concerns about Italy, he said.
He warned against the European Central Bank being used as a lender of last resort, saying it posed “great risks”, but he expected the benefits of the euro area to hold the currency bloc together.
Dr Donovan said that Ireland shouldn’t be obsessed about getting back into the borrowing markets by the end of 2012 or early 2013. “The date is not important; what is important is the trajectory and confidence that we are getting there,” he said.
In contrast to Dr Donovan’s views, Dr Alan Ahearne, academic economist and former adviser to the late finance minister Brian Lenihan, said the ECB could lend to the European Financial Stability Facility to leverage up the bailout fund.
Dr Donovan said there should be consideration given as to what would happen if Ireland lost its low corporation tax rate because there were major moves towards EU tax harmonisation and he was not as confident that the country could retain the rate.
