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Wednesday, 6 July 2011

IMF & EU's €9bn Profit On Irish Bailout...

Noonan spells out high cost of our rescue...

THE IMF and EU will make a €9bn profit over the lifetime of the bailout loans to Ireland.

Finance Minister Michael Noonan last night revealed for the first time just how much the international agencies will make if the €85bn in loans are drawn down in total.

The British government is also entitled to send auditors and accountants here to check the books as part of its bilateral deal to Ireland, the Irish Independent has learned.

It is also insisting that if Ireland ever leaves the euro the UK must be repaid in full and in sterling -- and not in any new Irish currency.

The developments come as the IMF-EU bailout team arrives back in Dublin today to begin the latest examination on whether the Government is meeting the terms of the €85bn programme of aid.

The progress of public sector reform and changes to wage-setting systems for low earners will be discussed in talks with IMF-EU bailout team.

And it also appears likely the Government will have to seek an extra €400m in savings in December's budget if the official outlook for economic growth worsens.

Mr Noonan said yesterday that he may have to slash €4bn from Government spending next year to meet the IMF-EU budget deficit target, rather than the €3.6bn previously flagged.

He said the international agencies want the deficit to be reduced to 8.6pc of gross domestic product in 2012.

The present plan pencils in €3.6bn of savings to meet this target but also relies on high economic growth to push down the deficit.

But the Finance Minister gave no indication that the Government was near achieving a 1pc reduction in the interest rate on the loans, which would save €150m per annum.

Mr Noonan said France and Ireland continued to disagree about proposals on the corporation tax base.

Tanaiste Eamon Gilmore made a keynote speech on Ireland's relationship with the EU this week without mentioning a cut to the bailout interest rate.

Mr Noonan also revealed for the first time just how much the international agencies will make if the €85bn in loans are drawn down.

When all the loans are put together, Mr Noonan said: "The total margin applying under existing arrangements could be of the order of €9bn over the period."

Although the Government has another three months to show the reforms in the public sector and for low-paid workers are being delivered on, the pace to date is expected to be flagged in talks with the IMF-EU team.

Enterprise Minister Richard Bruton's contentious labour market reforms will be touched upon in talks over the coming weeks with the IMF-EU team -- a move expected to strengthen the minister's hand in his negotiations with the Labour Party.

Mr Bruton's proposals to end Sunday premium pay were not discussed by the Cabinet yesterday. The final decision on the proposals will take into consideration both the IMF-EU team's views and a High Court case challenging the constitutionality of the joint labour committee agreements.

The team from the International Monetary Fund, the European Commission and the European Central Bank will begin their latest three-month review of the €85bn international bailout today.

Mr Noonan said he and his officials will be discussing a range of economic and budgetary issues, including the current outlook for 2012.

"On the review due to take place next week, we have not signalled any major items for renegotiation. However, during the quarter in the run-up to the budget there will be items for renegotiation because the manner in which we will make the correction in the budget may not accord with what is in the memorandum of understanding," he said.

"As long as our approach is fiscally neutral, we will be in a position to substitute one measure for another," he added.

Mr Noonan said the previous review agreed "major changes", including the jobs initiative, an expenditure review and a review from 2012 to 2015.

The minister said the programme negotiated by the previous government was to run straight through to 2014, but "there is now a commitment to a review following the first two budgets, which is significant".

The IMF is expected to give the thumbs up to the Government's progress so far in meeting budgetary targets, recapitalising the banks and bringing in the jobs initiative.

As part of the €85bn bailout package, the British government is lending €3.5bn.

Report by Fionnan Sheahan, Emmet Oliver and Donal O'Donovan - Irish Independent

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