Noonan says bailout relief will not lessen budget cuts

THE EASING of the EU-IMF bailout terms will not make the budget in December any easier, according to Minister for Finance Michael…

THE EASING of the EU-IMF bailout terms will not make the budget in December any easier, according to Minister for Finance Michael Noonan. He added, however, that the deal was a very significant step for Ireland which made the outlook for budgets in the coming years less harsh.

“I’m afraid we still have to face the music in December,” said Mr Noonan, who added that the budget for 2012 would have to contain savings of about two-thirds of those achieved this year.

The Minister’s comments indicate there is no prospect of significant deviation from the planned adjustment package of €3.6 billion for next year.

However, the easing of the bailout terms means it may not be necessary to have an adjustment of about €4 billion as was looking likely a few weeks ago.

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Mr Noonan said last night the reduction in the interest rate was very good news for Ireland and significant steps had been taken.

He drew particular attention to the provision in the agreement which meant Ireland would not have to go back to markets when the programme ended if the country had not reached its deficit target.

“There’s a commitment that if countries continue to fulfil the conditions of their programme, the European authorities will continue to supply them with money even when the programme concludes,” he said.

“That takes the whole issue of a second bailout for Ireland off the table.

“If we’re not back in the markets, the European authorities will give us money until we’re back in the markets.”

Mr Noonan said he expected other states with which Ireland had bilateral agreements, such as Britain, Denmark and Sweden, to follow suit with rate reductions.

He said that would take the debt savings up to about €900 million and, with a reduction in the interest rate payable to the International Monetary Fund to follow, it would bring the annual savings next year to more than €1 billion.

He added, however, there would be little or no easing of budgetary conditions for this year but there could be more positive implications in subsequent years. Earlier, Minister of State for European Affairs Lucinda Creighton said Ireland was determined to repay its loans rather than default.

“The private sector involvement for Greece is something that a number of member states were insistent on. It’ll happen in a very isolated way,” she said.

“Very clearly, Ireland and Portugal are considered to be entirely distinctive to Greece.”

She was responding to a claim by Independent TD Shane Ross that an Irish default was now on the agenda.

Stephen Collins

Stephen Collins

Stephen Collins is a columnist with and former political editor of The Irish Times