Minister for Finance Brian Lenihan said this evening there were opportunities for a new government to renegotiate or substitute certain parts of the €85 billion bailout deal for other measures provided they were "as economically efficient".
However, he insisted the position in relation to the interest rates on loans from the IMF and the EU was different and could not be renegotiated “in isolation of the wider context”.
Mr Lenihan was responding to remarks by the governor of the Central Bank, Prof Patrick Honohan, who earlier indicated that a new administration would be able to change the terms of the memorandum of understanding drawn up between Ireland and the EU-IMF.
In a statement issued this evening, Mr Lenihan said the interest rate for funding from the IMF and the EU was determined by a common approach for any borrower. “Accordingly, any changes to these rates cannot be negotiated for Ireland in isolation and must be seen in the wider context.”
Mr Lenihan said he agreed with Prof Honohan’s analysis that there was an opportunity for this Government or for any new government to “substitute alternative measures within the programme where they are as economically efficient and of equal fiscal effect”.
“This has always been the case. What is clear, however, is that the size and speed of the budgetary adjustment is not open for discussion."
Mr Lenihan's statement came as a political poll, commissioned by bookmaker Paddy Power, showed a further fall in support for Fianna Fáil.
The RedC poll showed support for the main goverment party falling a further three points to the same level as Sinn Féin at 14 per cent.
Fine Gael was measured at 35 per cent - an increase of 1 per cent on its previous showing - while the Labour Party fell two points to 21 per cent.
Earlier, Prof Honohan said that if a new government wished to substitute alternative measures which were "both economically efficient and of equal fiscal effect", it would receive a sympathetic hearing.
In a speech delivered to the Institute of International and European Affairs conference in Dublin, he said the EU and IMF consider Ireland's debt position manageable.
"They have committed their institutional funds on the basis of their forecast that Ireland is well able to service even if the full amount of €67.5 billion debt is drawn," he Honohan said. "To use a word whose relevance and appositeness is more evident now than it was six months ago, they do not consider the debt position to be other than manageable."
In his speech, Prof Honohan also reiterated his belief that a scheme offering insurance against "tail risks" would have been an ideal financial package for Ireland.
He said that while a premium would have had to be paid, an insurance scheme "would be even more effective under present circumstances than additional capital in restoring market confidence in both the banks, enabling them to access wholesale term funding at reasonable cost".
It would also lower the risks perceived by lenders to the State, he said. However, he pointed out that neither the IMF nor the EU facilities are able to offer insurance of this type as they are simply lenders.
The lack of such insurance means that it is not surprising that financial markets have adopted a largely wait and see attitude in relation to Ireland, according to Prof Honohan.
He said that the high level of Irish Government bond yields suggest that investors in bonds are still factoring in the possibility of “tail events”.
Uncertainty is also playing a key role in influencing Ireland's overall creditworthiness and thereby feeding back on the recovery process itself he added.
Prof Honohan said there are two main reasons behind the persistently high yields - the fact that Ireland has too much public and private debt, and a market perception of significant tail risk to the debt, especially related to the banks.
While the EU-IMF programme buys time for Ireland to reduce these two problems, it does not itself reduce them he added. "In particular, the financing provided is not structured to itself reduce the tail risks – that would have been beyond the current scope of the funds."
He said that, far from removing discretion from Ireland as a sovereign entity, the success of the EU-IMF programme hinges on actions that need to be implemented at home.
