THE STATE has fulfilled the conditions for the second quarter of 2011 set out by the European Union and International Monetary Fund as part of the four-year €67 billion rescue package for Ireland.
The Department of Finance and the Central Bank have told The Irish Timesthat all of the 17 actions specified in the memorandum of understanding with the troika to be completed by June 30th have been completed, or are well advanced to the satisfaction of all parties.
Several of the actions have been completed only in the last few days of June. The Central Bank and Credit Institutions (Resolutions) Bill completed its passage through the Oireachtas this week.
Another condition, the establishment of a Fiscal Advisory Council (to appraise and critique Government economic policy) was completed on Tuesday when the Cabinet gave it the green light. The five-member council was due to be named this week but the announcement has now been deferred until next week. This action was included at the behest of the Coalition, which included it in its programme for government.
Another condition completed this week was the publication of a detailed action plan by the Central Bank to allow it improve its risk assessment and strengthen its capacity to supervise credit institutions. The plan was published on Thursday.
The revised memorandum, agreed in April, incorporated some of the policy initiatives of the new Government. Two of these policies – the jobs initiative and the reversal of the minimum wage – were included as actions for the second quarter. Both were fulfilled in May.
Several of the actions are of a technical nature and relate to the banking sector. Among the actions undertaken have been liability management exercises of the banks’ subordinated debt holders (aimed at achieving the best possible haircut). The authorities have also made arrangements, as required, for a clawback of any injection of capital by the State.
The memorandum for the second quarter also refers to the desire to merge Irish Nationwide Building Society into Anglo Irish Bank. European Commission approval was obtained for that move on Thursday and the merger process began yesterday.
One of the other changes to the memorandum that came out of discussions between the Government and the troika was an agreement that land and development loans worth less than €20 million would not be transferred into the National Asset Management Agency. The EU and IMF laid down a condition that Bank of Ireland and AIB would “provide alternative deleveraging options” for these loans.
According to the memorandum: “If these plans are not feasible, the authorities will ensure that the banks will find and implement alternative ways to meet the deleveraging goals including . . . transferring the remaining loans to Nama.”
The plans have been submitted by both banks, although sources said it is too early to conclude that all such loans will avoid transfer to Nama.
Officials from the troika are due in Ireland shortly to assess if the conditions have been fulfilled and are expected to report in mid-July.
