THE GOVERNMENT is advancing talks with the EU-International Monetary Fund-European Central Bank troika to use all of the €3 billion it hopes to realise from the privatisation of State assets in a new stimulus plan to boost economic growth.
The development comes as Minister for Public Expenditure Brendan Howlin seeks to add “significant amounts in terms of billions” of euro to the Coalition’s €17 billion capital plan.
The evolving initiative includes more use of loans from the European Investment Bank, the EU’s long-term lender, and increased private-sector investment via public-private partnerships. The aim is to provide money for school, road and health centre projects for which there is no funding at present.
At meetings yesterday in Brussels, the Minister sought leeway to assign all money raised from privatisations to boost growth.
“It’s an enormous shift. I don’t want to pretend or to suggest that it’s finalised – these are new ideas – but there’s no resistance to a creative approach,” Mr Howlin told reporters. He declined to quantify the money involved but it is known that the Government aims to dispose of State assets worth €3 billion in the next two years.
Using all the proceeds to boost growth would mark a departure from the current agreement with the troika, under which 30 per cent of the money is to be set aside for investment, with the remainder used to retire debt. Taoiseach Enda Kenny has already hinted the troika might agree to allocate half the money for domestic investment.
Mr Howlin said yesterday that this is within the Coalition’s grasp. He also wants troika approval to put the other half of the proceeds into a temporary fund to support EIB lending into Ireland. This money would not be invested directly but would serve as a form of collateral, guarantee or credit enhancement to the EIB. At the end of the initiative, the money would still be used to pay down debt.
The EIB’s current lending to Ireland is constrained as a result of its triple-A credit rating, which reduces scope to lend alongside impaired institutions such as the Irish banks.
Increased EIB lending into Ireland would, in turn, expand the potential for public-private partnership investment schemes. Such schemes have the advantage for the Government of being accounted “off balance sheet”, meaning the borrowings involved do not go on to the national debt.
Under examination as part of this initiative is the possibility of replacing some of the money Dublin is scheduled to draw down from the European Financial Stability Facility fund with EIB money for public-private partnerships.
“The ideas I put on the table today are new even to the troika . . . in terms of utilising the totality of the money,” Mr Howlin said.
He believes Ireland could gain from any move to redirect unspent European structural funding to bailout recipients from beneficiary countries that have not spent the money. He said he would be surprised if such an initiative did not feature at a EU summit next Wednesday in Brussels.
