The Government has ruled out a second budget this year after what it termed the “successful completion” of the latest review by the troika overseeing Ireland’s bailout.
At a press conference, Minister for Finance Michael Noonan and Minister for Public Expenditure said the Government had achieved all the targets set out in the Memorandum of Understanding for the first quarter of this year.
The review carried out over by the past 10 days by the troika of the EU Commission; the European Central Bank and the International Monetary Fund, was the sixth since Ireland entered the €83 billion rescue programme in November 2010.
Mr Noonan said the better-than-expected national deficit figures for 2011 – coming in at 9.4 per cent of gross domestic product, ahead of the 10.1 per cent predicted – meant that the Government was well placed to meet its 8.6 per cent target for 2012.
Mr Noonan said Ireland was on track to re-enter the international markets as set out in the bailout programme. He said it would be gradual with a “bit of hand-holding” from the troika.
It was also confirmed that the economic growth projections for 2012 will be revised downwards by the Department of Finance from the 1.3 per cent forecast in December’s Budget. He said his department would likely trim the 2012 GDP forecast to 0.75 per cent when they publish figures next week.
In addition to the new arrangements agreed for Permanent TSB, both Ministers said there had been “significant policy breakthrough” on growth and jobs.
Mr Howlin disclosed that a greater percentage of the €3 billion raised from the sale of State assets will be used for job-creation than the one-third agreed with the troika three months ago.
While Mr Howlin did not disclose the exact figure Taoiseach Enda Kenny later said the Government had agreement to retain 50 per cent of the proceeds from State asset sales.
Mr Noonan said: “In the new Memo there is a great emphasis on growth and jobs. We see that as a significant policy breakthrough.”
Mr Howlin said the EU and IMF officials had agreed that there needed to be a focus on stimulus and job creation.
Asked about comments by ECB president Mario Draghi last week that it would not change the terms of the €30 billion Anglo Irish Bank promissory note, Mr Noonan said Mr Draghi was repeating the bank’s policy position.
He did not agree that it meant the matter was now closed.
“The Troika position is that they will continue to engage with us. Ireland needs further initiatives to ensure the long term sustainability of its debt situation. The best way of dealing with that is alternative arrangements under the promissory note,” said Mr Noonan.
He did not think it would be ready for the European Summit in June but said he hoped the technical paper on the matter would be ready for the working party of EU finance minsters looking at the issue.
The Ministers challenged two assertions put forward by Sinn Féin in recent days.
The first was its claim that under the new budgetary rules under the fiscal treaty, the State will have to find an additional €6 billion to meet the 0.5 per cent of GDP deficit target.
Mr Noonan said Sinn Féin was correct in the respect there would be a structural deficit but said it was a fallacy to say the only way to deal with it was by cuts.
He also said Sinn Féin’s claim that Ireland could veto the ratification of the European Stability Mechanism (the permanent fund for financing countries in difficulty) in the event of voting No was a fallacy.
“The ESM does not require Ireland. The rules for ratifying it are that if a number of countries providing up to 90 per cent of the funds ratify it, then the ESM is ratified.”
“Ireland is miniscule in terms of its contribution. The theory that we have some kind of veto, that is just factually incorrect,” he said.
There were several comments by both Ministers as to the need to bring construction activity up from its four-year slump towards European norms. Mr Noonan pointed out that for the first time in a long time, house prices had marginally increased in Dublin in March, by less than one per cent.
Officials from the troika spent 10 days reviewing the State's compliance with targets and deadlines set out for the first quarter. This review marks the halfway point in the programme which is due to end in December 2013.
More than 70 per cent of the funds under the programme have now been drawn down and 100 required actions have been completed.
The Governor of the Central Bank Patrick Honohan said this evening that the Troika programme had caused the fiscal adjustment to be protracted.
"The programme has allowed the reduction in the fiscal deficit to be a gradual one, with the scheduled deficit for this year higher than anywhere else in the EU. Without Troika financing, the fiscal adjustment would have had to be much more abrupt and disruptive," he told delegates at the annual meeting of the Irish Economic Association.
