IMPLICATIONS:MINISTER FOR Finance Brian Lenihan expressed confidence early yesterday that the €750 billion EU/IMF rescue package for distressed euro countries will be enough to satisfy financial markets.
Saying there was no suggestion at a key meeting of EU finance ministers that Ireland had any funding difficulties, Mr Lenihan told reporters after the deal was struck that there was no requirement on the Government to introduce an early budget to accelerate the correction in the public finances.
As he prepared to return to Dublin after the meeting, the Minister said moves by the European Central Bank to start the purchase of government debt would deter speculation in financial markets.
In their communiqué after the meeting, EU finance ministers said member states’ plans “for fiscal consolidation and structural reforms will be accelerated, where warranted”. The Minister, however, said there would be no change in his budget plans. “There’s been no suggestion of that. In fact, Ireland met its targets in terms of budget 2010 this week and it’s very clear now after four months that both on revenue and on expenditure, we’re on target,” he said.
“So there’s no question of any pressure on Ireland to draw up an early budget. What we’ve seen today is a discussion among the finance ministers about a problem which is European-wide – it’s not a problem connected with Ireland – it’s a problem that required the European response.
“What the finance ministers have done this evening is made a political response in terms of our commitment as finance ministers to ensure the integrity of the euro zone, and demonstrate that funds are available if particular states have funding difficulties.
“There’s no suggestion that any state other than Greece has funding difficulties, but it was important to show we have a credible method of resolving those funding difficulties, and we’ve agreed such a credible method this evening because what we’ve said is we will guarantee funding through a special arrangement supervised by the Commission if any states get into funding difficulties.”
Asked whether he was confident that the plan would appease the markets, Mr Lenihan said: “I believe it will, because what we’ve agreed this evening is that up to €500 billion should be made available to states that have difficulties.” The deal was “purely a contingency arrangement”, he said. “I do want to emphasise that there was no suggestion at any stage in the meetings today that Ireland had any difficulties whatever.”
Mr Lenihan said the ECB’s move to buy sovereign bonds was a “very significant” development. “It’s significant because the bank is intervening directly in the bond market, both for state bonds and for private bonds, and it’s the secondary market.
“The market exists for these bonds, and the bank, by purchasing these instruments, will deter the speculators, because it will ensure that the speculators will not be able to make a margin on these bonds if the bank is intervening in the market. Naturally, the bank is not going to disclose when or how or which bonds it’s going to purchase.”
