THE MINISTER for Finance Brian Lenihan said talks with the European Union and the International Monetary Fund on a rescue fund had yet to resolve “crunch issues”.
He declined to say whether senior bondholders in the banks would be forced to bear some losses as part of the bailout deal.
Responding to criticisms of the Government’s expectations for economic growth in the four-year recovery plan, Mr Lenihan said the forecasts were “reasonable”.
“Nobody would suggest they are excessively optimistic,” he said.
He expressed confidence that the Government will have a majority to pass the upcoming budget which will front-load €6 billion of spending cuts and tax hikes in the €15 billion four-year plan.
His comments suggest the Government may have the support of Independent TDs Jackie Healy-Rae and Michael Lowry who had signalled that they might not support the 2011 budget plan.
Speaking at the Thanksgiving lunch of the American Chamber of Commerce Ireland, Mr Lenihan said: “I am quite satisfied from my discussions both with the parties in Government and the various public representatives in Dáil Éireann that there is a majority for the budget and that it will pass.”
The Government was determined to fix the public finances and the banks, he said, and negotiations with the EU and the IMF on a rescue fund would be concluded “in the weeks ahead”.
Good progress was being made in talks, he said, but he declined to say when they would conclude.
Repairing the banks would cost “a very definitive amount of money”, he said, and that the talks would lead to a “permanent resolution” to the banking problems.
“The external assistance we have sought is primarily concerned with the need to stabilise this sector,” he said.
Ireland’s 12.5 per cent corporation tax rate has not and would not be under discussion as a condition of the bailout, he said.
Ireland was in a “very different category from those countries that have also experienced the brunt of this economic crisis in Europe”, he said, as it would have a small balance of payments surplus in 2011.
Barry O’Leary, chief executive of the IDA, told The Irish Times that multinationals had sought assurances that Ireland’s corporation tax would not be changed as a condition of the rescue.
“If it was to change they would be very concerned,” he said.
Lionel Alexander, president of the chamber, said that Ireland needed to maintain competitiveness and he welcomes the decision to hold corporation tax at 12.5 per cent in the recovery plan.
This could “copper-fasten” existing inward foreign investment which provides 240,000 jobs and contributes 55 per cent of corporate tax take and €19 billion of direct expenditure, he said.
