The first review of Ireland’s €85 billion international rescue plan has concluded that the Government has met its fiscal targets by “a comfortable margin”, but it warned that challenges remain.
The troika of the International Monetary Fund, European Central Bank and European Union said yesterday that Ireland was making “good progress” in confronting its “deepest economic crisis ever”, but it would need to maintain “steadfast policy implementation”.
Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin said the Government had succeeded in substantially changing four important areas of the memorandum of understanding agreed with the 30-strong team of EU and IMF negotiators.
These are: a reversal of the €1 cut in the minimum wage; the incorporation of the Coalition’s jobs initiative to be delivered within 100 days of entering Government; no further transfer of assets from banks to Nama; and the acceptance of the Government’s planned comprehensive spending review to be completed by September.
The Government and the troika’s representatives held separate press conferences in Dublin yesterday to respond to the outcome of the first quarterly review process.
“This programme is a lifeline for Ireland,” said Ajai Chopra, the IMF’s deputy European director and head of mission for Ireland.
“It represents an Irish solution to an Irish problem, and it enjoys our support. In the root of the problem was a deep banking crisis and that’s where the emphasis of this programme is.
“The new Government is making good headway on this front,” he added.
Mr Noonan said all conditions set down by the troika for the first quarter of 2011 had been met. He said he would raise the issue of the interest rate Ireland is paying for the rescue loan at a meeting of European finance ministers next month. He said the reversion to the €8.65 national minimum wage would be balanced by a halving of employers’ PRSI costs for all those earning €356 or less each week.
He would not say how much this would cost the Exchequer, or give details on how it would be funded, prompting criticism from Opposition parties.
Fianna Fáil’s finance spokesman Brian Lenihan said that in spite of the rhetoric about change, the bailout package remained the “same deal, with the same political priorities identified by the last government.
“The only difference is an additional cost of approximately €400 million to the taxpayer to fund a reduction in PRSI. How are they paying for the reduction in PRSI?”
Sinn Féin’s finance spokesman Pearse Doherty also said the Coalition remained bound to the same EU-IMF deal, having achieved only a few “minor changes”.
Mr Doherty also claimed the lowering of the employers’ PRSI rate only for those earning the minimum wage would incentivise employers to drive down wages for others just above the minimum wage.
He said that if PRSI were halved, an employer would save €61 a week by reducing to €356 the wages of a worker earning €390.
Minister for Communications Pat Rabbitte said it was absurd to say the Government was implementing the policies of Fianna Fáil.
On RTÉ radio today, he said it was "cloud cuckoo" talk to say Ireland should walk away from the euro currency or the bailout deal.
Mr Noonan also refused to divulge the overall cost of the jobs initiative, or explain how it would be financed, apart from saying it would be “fiscally neutral”.
He accepted that its inclusion in the EU-IMF rescue programme had resulted in “a lot of new conditions” but said he would not disclose these until the initiative was announced.
The revised document states that the targeting of sheltered sectors of the economy – a reference to the pharmacy, legal and medical professions – would be examined, as would the joint labour committee structures setting out pay rates, terms and conditions for workers in other sheltered sectors.
