THE MINIMUM wage will be restored to its previous level, transfers to the State loans agency will cease and employers will have their social insurance contributions reduced under the revised terms of Ireland’s finance deal with the European Union, European Central Bank and the International Monetary Fund.
The €1 cut to the minimum wage will be reversed, taking the rate back up to €8.65 an hour, Minister for Finance Michael Noonan confirmed.
In order to keep the cost of hiring staff down, this will be offset by a 50 per cent reduction in the amount of PRSI employers must pay on wages up to the level of the minimum wage.
Mr Noonan described the PRSI move as the “quid pro quo” for the reversal of the minimum wage cut.
“Obviously they’re interested in labour market incentives. So are we, because to get the economy going we have to have a free labour market,” Mr Noonan said.
The Government will announce a full jobs initiative programme in the Dáil in May. There will be “a lot of new conditions” added to the memorandum of understanding as a result, the Minister said, adding that it would be “premature” to announce them yesterday.
However, the package of job creation measures has been agreed both in principle and in detail with Ireland’s European and international financiers.
Meanwhile, the EU and IMF have approved the Government’s proposal that there should be no further transfer of assets to the National Asset Management Agency (Nama).
“They agree there is a better way of doing things,” Mr Noonan said.
The so-called “Nama 2”, which was to have involved the transfer of bank loans below a value of €20 million to Nama, was one of the financial sector measures agreed by the Fianna Fáil and Green Party government in the original EU-IMF deal.
The banks will now rid their balance sheets of these loans at the same pace as the deleveraging already announced in the Government’s recent bank restructuring programme.
The Government did not give any details on changes to other revenue-raising measures.
Mr Noonan said the balance between taxation and expenditure cuts would be decided as part of the normal budgetary process and the spending review that the Government announced last week.
The so-called troika has also given its seal of approval to the spending review, the Minister indicated. “They are delighted that we are taking decisions so early in our period in office.”
All changes to the terms and conditions of the memorandum of understanding with the EU and IMF, which was signed by the former government last November, must be fiscally neutral, Mr Noonan emphasised.
“We have exchanged conditions we disagreed with in the memorandum of understanding with conditions that we wanted in the memorandum of understanding,” he said.
There was no announcement on any changes to the interest rate on the €85 billion rescue package agreed with the troika. However, the Minister said negotiations on a reduced interest rate were progressing well.
REVISED DEAL MAIN POINTS
Ireland's fiscal programme is on track and it has met the critical benchmarks for banking sector reform specified under the European Union-International Monetary Fund deal.
No changes have yet been agreed or announced to the interest rate on loans supplied to Ireland under the €85 billion finance package.
The final approval to the review of the conditions attached to the EU-IMF deal will take place on May 15th and 16th.
The €1 cut to the national minimum wage will be reversed, taking the hourly rate back up to €8.65, as pledged by the Coalition in its programme for government.
There will be a 50 per cent reduction in employers' PRSI on the tranche of income up to the level of the minimum wage.
Sectoral pay agreements in certain sectors known as employment regulation orders and registered employment agreements will be reviewed, as previously indicated.
Other measures will be taken to increase competition in the sheltered sectors of the economy, as promised in the programme for government.
An announcement will be made in the Dáil in May on a jobs initiative programme that has been agreed in detail with the EU and IMF.
A fiscal advisory council will be established to provide an independent assessment of Ireland's public finances.
The Department of Finance will hold a seminar in May to discuss policy options on the way the Government conducts its budget.
A Fiscal Responsibility Bill will be submitted to the Dáil before the end of 2011.