EURO GROUP chief Jean-Claude Juncker has backed the Government in its drive to make a €15 billion budget adjustment in its four-year fiscal reform plan. He also endorsed the €6 billion target for the 2011 budget.
In the European Parliament yesterday, Mr Juncker expressed confidence in the credibility of the current efforts to bring the budget deficit within the 3 per cent EU limit by 2014.
As Irish borrowing rates breached a record 8 per cent for 10- year money, he argued against demands from German chancellor Angela Merkel for national insolvency procedures in the eurozone.
The decision of EU leaders to grant Berlin’s demand to examine that option is widely held to be a big factor in the current strain on the Irish bond yields.
Mr Juncker, Luxembourg’s prime minister and president of the group of eurozone finance ministers, told a committee of MEPs he hoped the four-year plan would put Ireland on track for sustainable growth.
“I am confident that the Irish authorities will be able to implement the multi-annual budget conciliation programme over a four-year period, which will correct their deficit by 2014, which will mean that their level of deficit would be in line with what our expectations are,” he said.
Arriving at the parliament in Brussels, Mr Juncker said Ireland could avoid emergency funding if it met its budget goals. He called for the sale of euro bonds to finance any rescue of a distressed eurozone government and supported the European Central Bank (ECB) in its split with Germany over new measures to settle future debt crises.
Mr Juncker indicated that he shared the concerns of ECB chief Jean-Claude Trichet that a German proposal to force investors to foot part of future rescue bills could dry up demand for bonds from fiscally weak countries.
The plan, first promoted by Dr Merkel, moved to the top of the EU agenda last month after it was backed by French president Nicolas Sarkozy.
“This could potentially drive investors from the eurozone, especially from the peripheral countries,” Mr Juncker said. Europe would be isolated by declaring “ex ante that in every instance of crisis resolution, the private sector has to be implicated,” he added.
He also made a point of distancing Europe’s examination of debt restructuring from the EU/IMF rescue plan for Greece.
“Concerning restructuring of Greek public debt, it isn’t an option to be considered,” Mr Juncker said. “The Greek authorities are not considering it. I don’t know anybody in Europe . . . who is really considering that option, and that’s the reason why, regardless of the Greek case, I am very hesitant about fixing any ex ante rules which say that in crisis resolution in Europe we’ve always got to carry out restructuring by bringing in the private sector.”
