MINISTER FOR Finance Brian Lenihan has made the case to the EU’s new economics commissioner, Olli Rehn, that Ireland is now at a “different stage” to Greece and other weak euro-zone members thanks to stringent austerity measures he has taken.
Before euro group finance ministers discussed moves to bail out Greece last night, Mr Lenihan said at a meeting with Mr Rehn that he was cautiously optimistic that Ireland was turning the corner with an expansion of the economy in prospect later this year.
While setting out to Mr Rehn the budgetary measures he has taken since July 2008, the Minister said he still expected the economy to shrink this year by 1.25 per cent.
He described the decisions he has taken as “difficult, but necessary”, adding that the €4 billion programme of cuts this year, amounting to 2.5 per cent of gross domestic product (GDP), follow cumulative cuts totalling 5 per cent of GDP in 2009.
Mr Rehn succeeded Joaquin Almunia as economic and monetary affairs commissioner when the new EU executive took office last week. He is now the arbiter of an EU-approved recovery programme that is designed to bring Ireland’s public finances within the parameters of the union’s rulebook by 2014.
Mr Lenihan also met yesterday with Mr Almunia, who has taken charge of the competition portfolio. In his new job, Mr Almunia has prime responsibility for the EU’s oversight of Nama and the restructuring of the major Irish banks.
In addition to restructuring plans from Allied Irish Banks and Bank of Ireland – which are likely to lead to major divestments from both institutions – Mr Almunia’s office is also scrutinising a restructuring plan from the nationalised Anglo Irish Bank.
Mr Lenihan also met the new Irish commissioner Máire Geoghegan-Quinn, their first engagement since she took over the research, science and innovation portfolio.
The Minister’s spokesman said he told Mr Rehn that Ireland, like all countries, has been carefully watching movements in the international markets. Pressure on the euro led EU leaders to pledge last week to rescue Greece “if needed” following an upsurge of anxiety about the weak fiscal position of Spain and Portugal.
“Ireland is at a different stage to those countries now attracting the most adverse comment and this has been reflected in the Irish spreads which have remained relatively steady over the recent crisis,” Mr Lenihan told the commissioner. “This reflects that we are already some way down the path of addressing the three main challenges facing us.”
He said the Government has shown its commitment to continue taking “firm and decisive action” to address the requirement to improve competitiveness; to restore the stability in the public finances; and to address problems in the banking system.
“There is now a broad consensus that the economy will bottom out by mid-year and that a resumption of positive growth in the second half of this year is in prospect,” he said.
“Restoring competitiveness is also important,” said Mr Lenihan. “The necessary price and wage competitiveness adjustments are under way and I am encouraged by this.”
