The Government has said the latest review by the EU and IMF of Ireland’s adherence to the bailout programme has been a success, with all targets for the third quarter being met.
Minister for Finance Michael Noonan said this morning the Government and senior troika officials had not spent too much time reviewing the quarter because there was recognition that targets had been met.
Mr Noonan said some of the engagement over the past 10 days had been about December’s budget and agreement from the troika that savings measures specified as conditions in the memorandum of understanding could be substituted for alternative savings identified by the comprehensive review of expenditure, which is being overseen by Minister for Public Expenditure Brendan Howlin.
“The troika made it clear that they had no difficulty in substituting one fiscal measure for another with an equal value,” said Mr Noonan, who was speaking at a joint press conference with Mr Howlin in Government Buildings this afternoon.
Mr Noonan also indicated that the Government would not be departing from its promise not to raise income taxes or to cut social welfare rates in the Budget. The commitments were made separately by Taoiseach Enda Kenny and Tánaiste Eamon Gilmore earlier this year.
“There was nothing in the discussions that will cause us to move from the commitment we made in the programme for government or from comments made earlier this year,” said Mr Noonan.
He said the framing of the forthcoming budget would be a matter for the Government “as long as [measures] are robust and replace other measures.
He said that all had agreed that reaching a deficit of 8.6 per cent of GDP remained the target, and also signalled that the actual amount required to do that may be close to €3.6 billion and not substantially higher.
He said the final adjustment would be contingent on self-employed and corporation tax returns in October and November, as well as an assessment on whether the yield on Vat remains below expectations, a development that will have a knock-on effect for 2012.
Mr Noonan emphasised that relations with the troika were very good. “I am not trying to give the impression that we are all pals but we have a very constructive relationship from our point of view,” he said.
Mr Howlin agreed saying that there was “very clear line of trust” between the parties.
Speaking about his responsibilities as Minister for Public Expenditure, said he had briefed the troika on the Comprehensive Review of Expenditure, from which the Government hopes to find alternative savings that will obviate the need to raise taxes or cut social welfare budgets. He said there was agreement that once the alternatives were robust they were acceptable so long as the Government met its 8.6 per cent target.
Turning to the subject of the sale of State assets, Mr Howlin confirmed that discussions remained inconclusive. He said that the debate between both sides had focused on two things: the total amount of State assets that will need to be sold and how the money will be spent. He also accepted the troika has not formally moved from its position that any monies raised must be used for debt reduction.
The Government has committed to selling a total of €2 billion in assets and using the money to fund job creation. However, IMF papers have suggested a greater disposal amounting to €5 billion with the monies raised being used to reduce the State’s debts.
Asked about when the final decision would be made, Mr Howlin signalled it would not be in the near future.
“There will not be a fire sale,” he said, pointing out that the troika officials were practical and pragmatic and were not going to set arbitrary time frames that are not best value. “The only agreement so far is for the sale of €2 billion in assets.”
He said the Government had agreed to sell a minority stake in ESB and that a working group would look at the valuation of other State assets, with a view to discussing them once agreement was made on how the money raised would be used.
“It’s clear that original view of troika was that any State assets would have to be used to pay down debts. This is not a position that they have moved from,” he said.
Asked about the wider crisis affecting the euro zone and its potential impact on Ireland, Mr Noonan said EU states had not found a solution as yet.
Mr Noonan said one of the key issues was contagion, to ensure that the rescue of Greece will not “kick on” to Ireland and Portugal, and beyond that, to Spain and to Italy. “On the basis of what I know there are no solutions to that yet. Hopefully something will emerge [at the EU summit] over the weekend.”
Mr Noonan said the recent report by the Government-appointed Fiscal Advisory Council had been a “bridge too far” in some of its recommendations.
On its recommendation of a minimum €4 billion adjustment, he said that if one went too far in front-loading the adjustment demand was taken out of the economy.
On the council’s suggestion that a 1 per cent, rather than a 3 per cent, deficit target by 2015 might be more desirable, he said it was a bridge too far.
“Economists can look at thing on a narrow enough focus. Politicians need to look at things like social cohesion,” he said. “To pull it back to 1 per cent would mean an additional correction of €4 billion. You now how hard it is to correct. It’s a very big ask.”
He added: “It’s not like an All-Ireland where somebody blows a whistle and away you go lads. You need to keep discipline.”
