Belfast Telegraph

Tuesday 22 July 2014

Ireland plans clean bailout break

Taoiseach Enda Kenny TD awaits the arrival of Italian prime minister Enrico Letta at Government Buildings, Dublin.

Ireland is to make a clean break from its international bailout programme without seeking a backup overdraft.

The once financially-crippled country will go it alone when it exits the programme on December 15 and re-enters the money markets.

Taoiseach Enda Kenny said it was the right decision for Ireland.

"We will set out a path to a brighter economic future for our people, a path from mass unemployment to full employment from involuntary emigration to the return of thousands of people who have to leave for other countries to find work," Mr Kenny said.

"Today is just the latest step in that ongoing journey, a significant step indeed but also just another step towards our ultimate job of getting Ireland working again."

Ireland's finances, budgets and policies have been under intense scrutiny since the country agreed to a massive loan package in 2010.

Its debt masters, a Troika of the International Monetary Fund (IMF), the European Central Bank and European Commission, have carried out 12 intense reviews over the last three years and imposed a series of tough targets. All of which were met by the state.

Among them were orders for the Government to impose controversial water charges, which are due to take effect from next year, and a much-debated property tax introduced in the first half of 2013.

A series of deep cuts across the health service were also enforced under the Troika's rule in an attempt to save money, as was a major overhauling of the public service sector under the divisive Haddington Road Agreement.

As Ireland becomes the first Eurozone state to have successfully completed a strict bailout programme, the Government decided not to seek a precautionary credit line.

The Taoiseach's announcement followed an emergency morning Cabinet meeting during which Finance Minister Michael Noonan briefed ministers ahead of a summit in Brussels.

His department said the decision to leave the 85 billion euro (£72 billion) bailout without a so-balled backstop of credit was the best option.

It said market and sovereign conditions are favourable towards Ireland. The country has built up more than 20 billion euro (£17 billion) in cash reserves since returning to the international money markets last year.

It said this can be used to keep Ireland in the black until early 2015.

It also said the latest budget, announced last month, had been designed to deliver a primary balance or small surplus.

IMF managing director Christine Lagarde said the performance of Ireland bodes well for the future.

"Although uncertainties remain in Europe and the global economy more broadly, Ireland is in a strong position in terms of its bond yields and has built a sizeable cash buffer," Ms Lagarde said.

"We look forward to continuing to work with the authorities as they address the challenges that remain."

Likewise, Olli Rehn, European Commissioner for Economic and Budgetary Affairs, said Ireland is well placed to make a successful and durable move from the bailout to normal funding.

Mr Rehn said Ireland is an example that determined implementation of a comprehensive reform agenda can decisively turn around a country's economic fortunes.

"Ireland has accumulated significant cash buffers under the programme, helped by the decision taken earlier this year by European creditors to extend the maturities on loans granted to Ireland," he said.

In an understated address to the Dail parliament confirming the clean exit from the bailout, Mr Kenny warned that difficult days still lie ahead.

"Neither today's decision, nor the exit from the bailout in December, means the end of difficult economic decisions. There are still demanding times ahead," he said.

"It does not mean any windfall of cash. It won't mean that our economic and financial challenges are over."

Meanwhile, the Irish Government is to publish a medium term economic strategy to ensure continued growth.

It has struck a deal with German Chancellor Angela Merkel, who has advised the German development bank KFW to invest in Irish business.

Ms Merkel said she was confident the Government was working in the best interests of the Irish people and that Ireland was ready to be cut loose from its debt masters.

"This is an important day for Ireland, and an important moment for the Eurozone," she said.

"It is now time for Ireland to return to the markets in a sustainable way, strong enough to do so without the need for further credit support."

The chancellor added: "Ireland and Germany have agreed to cooperate for an initiative to improve funding mechanisms for the real economy, including access to finance for Irish SMEs.

"The KFW, the German development bank will work with the Irish authorities swiftly, in order to deliver on this initiative at the earliest possible date."

Despite a cautious tone in Mr Kenny's announcement, the opposition accused the Government of "bravado".

Fianna Fail leader Micheal Martin, who served as a minister in the previous coalition government that had to bring in the international bailout, said a precautionary credit line would have served as security.

"It's not a sign of weakness, it's a sign of security - and maximum security for this state," Mr Martin said.

"It's not that you might crash into somebody, but somebody might crash into you. It's fundamentally an insurance policy for the people of this country."

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