THE MINISTER FOR Finance Michael Noonan and the Minister for Public Expenditure and Reform Brendan Howlin briefed the media today as the Troika delivered its verdict on the sixth review of Ireland’s bailout programme.
Here’s how it unfolded.
Hello and welcome to our live coverage of the press conference from Michael Noonan and Brendan Howlin as the Troika completes its sixth review of Ireland’s bailout programme. Anything other than a thumbs up and a gold star from the EU, ECB and IMF will be a shock.
We’re expecting plenty of positive statements from Noonan and Howlin before the journalists in the room get stuck in with a few questions.
We’re just waiting for proceedings to get under way here. The Ministers should be with us shortly.
These press conferences are not without controversy. The last time Michael Noonan did one, he made some choice comments about emigration being a “free choice of lifestyle” which caused a lot of anger though he later clarified the remarks.
As has been noted already the Troika is not doing a press conference this time, citing the sensitivity of the timing given there is a referendum in less than six weeks time. So no opportunity to hear Vincent Browne in flying form as he goes through an ECB official for a shortcut:
Still no sign of the Ministers but a statement from the Department of Finance says that Ireland has successfully completed the sixth review. No surprise there. We’ll have the full statement shortly but it does say:
In line with each of the previous five quarterly reviewsIreland has continued to achieve all of the targets set under our programme of assistance.
Noonan: We will be able to continue to draw down the money we require. About 70 per cent of the monies will have been drawn down shortly. Programme is beyond half way stage. Number of significant advances this time.
Issue of the future of Permanent TSB has been agreed in principle. It will continue as a small retail bank, providing personal loans and mortgages to core customers. The impaired assets will be transferred into a different department. It’s a further development in ongoing restructuring of banks.
Significant piece that hasn’t been dealt with and has now been dealt with.
Noonan: The PCAR system of stress testing banks will now be aligned with other systems across Europe as the Irish banking system normalises. The schedule for that is now the Spring 2013 across Europe. No stress testing of the banks in the autumn. This is a sign of the normalisation of the banks in Ireland.
In the new MoU, there is a great emphasis on jobs. A significant policy breakthrough. Howlin will deal more with that. The context is quite good.
Noonan: We’re on course to achieve our 8.6 per cent target. Nothing on horizon to suggest we will require a mini-budget. Speculation about it “is less accurate than it ever was”.
Just to confirm then that Noonan is pretty adamant then that there will be no need for a mini-budget as had been speculated. Howlin speaking now…
Howlin: We are reaching all the targets set. There is no difficulty with the programme. The focus has been embraced by all three partners to have a growth and job creating agenda. We need to bring discipline to the way we budget. Last year’s target was more than exceeded, an underlying 9.4 per cent. Confident of reaching 8.6 per cent deficit to GDP ratio.
Howlin: We’ve signalled instruments we want to use such as the pension reserve fund. We have utilised that for the NewERA, Irish Water and so on. Want to access more funding from European Investment Bank. Have to find projects that we can drawn down money for in a “job rich fashion”.
Want to use portion of sale of State assets proceeds for job creation. A third of the money could be reinvested in economy. There is now an agreement that we will go beyond a third. Exact quantum to be determined but Howlin says more money from sale of State assets can be used for job creation.
Howlin: Unemployment as it stands remains unacceptable. No significant impact on frontline services by downsizing of public service which is being acknowledged by the Troika.
Questions now…
Question in relation to promissory notes and the comments from ECB president Mario Draghi. What is position on the promissory notes?
Noonan: Suggests that Draghi is not being quoted fully. Under terms of present contract, promissory note has to be paid but Draghi said there is a willingness to change terms. But it is not simple. Troika will continue to engage with us and acknowledge that Ireland needs further initiatives to ensure long term stability of debt situation. Best way would be arrangement on the note.
Question about NAMA and its operations with the Troika, and the Croke Park Agreement…
Noonan: No particular engagement about NAMA. €72bn of impaired loans have now been transferred to the body. Been successful in selling property in London and Dublin. NAMA is something that the Troika are happy with for the minute. Not one of the items highlighted on this occasion.
Howlin: Troika happy with progression of CPA. Most employers who want to reduce payroll costs do it by reducing numbers. Payroll cuts as well, premium pay being looked at as well. Significant downsizing is on track.
Our resident Irish speaker Gavan Reilly informs me that Noonan has said there was no discussion about the referendum at all and there were keen not to take a political stance, they being the Troika.
Noonan: As well as all the other things we do under programme, primary purpose is to reduce the budgetary deficit to below 3 per cent by 2015. Then under treaty target is to borrow at maximum 0.5 per cent of GDP. There will be a gap that budgets will have to deal with but growth in the economy should also help to meet targets.
Noonan: The obvious way to deal with structural faults is to deal with structural faults. One of those at present is the building and construction industry that was over 20 per cent of GDP. If that collapses, as it has, then there will be a big gap and a lack of employment. So that needs to be fixed.
Noonan: There will also be a pension burden in the future. The reform of public service pensions will address the structural deficit in the years when there is expected to be a pension burden.
Noonan: All the initiatives that “Richard” and “Joan” are working on will help address this structural deficit. We presume that he means Richard Bruton and Joan Burton. They’re on first name terms it seems…
Howlin: The plans that the government have like Pathways to Work will help address the problem in the economy. No increase in quantum of State assets to be sold – remains €3bn – but more of that money can be used for job creation projects after this latest review. No comment on what the exact figure will be but it will be greater than a third.
Noonan: The Department of Justice are taking lead role in complex piece of legislation. Schedule publication date for Personal Insolvency Bill is early June and it will be debated in the Dáil before summer recess.
Howlin: It is not the only instrument to deal with problems facing households in relation to mortgage arrears. Robust, ground-breaking legislation will be ready for the summer. Describes bill as “significant new mechanism”.
Noonan: On PTSB, the customer base has been in general terms blue collar customers so bank is filling very important function in provision of credit in Ireland. Might put impaired loans in IBRC in the future but no definitive decisions have been taken on that.
Irish Life is being acquired by State for €1.3 billion. It will be transferred in June. Government would like to sell it but that fell through before Christmas when the board of Canada Life did not sign off on the deal. There is still interest. It has value and its value has increased.
Question from David Murphy from RTÉ about which bank is going to be larger of the two that will offshoot from PTSB…
Noonan doesn’t have an answer on the issue of the splitting of assets in PTSB but the mandarin from the Department, John Moran, says that they will have to take a look at the assets. The objective is to do it in a capital neutral way, the recently appointed Secretary General to the Department says.
Noonan: The Eurostat survey was a result of a different view on bank debt (it estimated that the deficit figure was higher than 9.4 per cent). But the department is working off its figure of 9.4 per cent and aiming on getting it down to 8.6 per cent.
Howlin: Our growth projections impacted upon by depressed growth in partner countries. Absolutely embraced by partners who are anxious that government makes clear that success is defined as a recovering economy with growing GDP and falling unemployment.
Howlin: We’ve shrunk capital investment but still need more in the coming years on sectors like healthcare, education and construction.
Noonan: Nature of relationship with Troika is not two sides on opposite sides of the table. It’s identifying problems and working together to resolve them. That’s the way it is.
There is a serious lack of proper proposals underpinning effort to get jobs and growth on a Europe-wide level. There needs to be a shift in Europe so that there are European driven mechanisms to provide extra capital for projects. For example, the European Investment Bank and less red tape in accessing monies from that needs to be implemented.
Noonan: Increasingly people are saying: “Will you stop talking about growth and jobs and give practical examples”. The one that is easiest to fill is through European Investment Bank and providing more access to funding from that.
Noonan: PTSB has the makings of a sound, profitable, retail bank. 1800 people employed and a big branch network. It would be a tragedy if it is not made profitable again. Policy to have it as the third bank alongside the two pillar banks.
The timing of the PCAR stress test exercise is a matter for the Central Bank with EU authorities. View of Ireland now is that programme is working and that things are normalising and that we are not an exceptional case. Stress tests can now be carried out the same as everywhere else in Europe.
Howlin: We haven’t quantified a specific number. Want to reduce unemployment by as much as we can. Biggest collapse has been in construction sector. It will never be back at its peak because it was unbalanced.
Howlin: Lots of announcements on significant construction projects which will impact on that sector. There will be knock-on effects from construction projects that are being started.
Noonan: 1.86 million working at present according to policy documents from Richard Bruton. Aim to have 100,000 more at work by the time this government finishes. Despite the recession a lot of people have stayed in work. Employment fell below a million in the 80s. In our worst days now, it’s almost double that.
Noonan: Stuff we did on property in finance bill, tax relief on mortgages and the capital gains tax break for people buying commercial property seems to be “coming through”. There are “lots of stories about queues of people looking at nice family homes at present.”
Not sure what Noonan was saying there about house purchases. I have seen any stories about people queuing up to look at houses… haven’t seen any such stories recently.
Noonan: Troika would not get involved in referendum or comment about it. Won’t interfere in internal politics. My own view is that it will be very difficult to get back to the market because of linkage between Treaty and that issue. If you remove backstop of ESM, markets are less likely to let us back in. It would make it “very difficult” if we don’t pass referendum.
Another fallacy promoted by Sinn Féin that there is a “cunning plan” that we can exercise a veto if we do not ratify ESM treaty. Rules for ratifying ESM treaty are that if a number of countries ratify and are providing 90 per cent of funds then it is ratified and Ireland’s contribution is small so not ratifying it will have no bearing.
Howlin: Personal insolvency legislation is “absolute priority” for the Dáil. Bill published in June but it is a complicated issue that involves careful steering. Framework is agreed. Needs to be drafted and agreed. Available to publish before summer recess. The Troika just don’t arrive every three months. There are permanent representatives here and we interact with them all the time.
Noonan: Forecasting for growth of 1.3 per cent at Budget time. Department of Finance doesn’t do rolling forecasts. Next forecast due in next few days and “of course it will be marked down” as other forecasts have been marked down across Europe. No one accuses Department of Finance of “puffing” the forecasts. Things change as they have across Europe.
Noonan: More political uncertainty in recent weeks with situation in France, Serbia, Greece, Germany and Netherlands and their impending elections this year. But Ireland will have a stronger performance in the second half of the year. But forecasting is “an inaccurate science”. We need a stronger growth forecast if we were to get the kind of growth and job creating agenda we’re talking about.
Noonan jokes that he thought that for people who had such a long experience of the courts system that for Sinn Féin to be “bringing in witnesses from prosecution” was a mistake, referring to those leaflets. Some chuckles in the press room at that.
Howlin: We welcome statements from Francois Hollande or anybody else that support the line that growth and jobs is a specific agenda item on a Europe-wide level. Aside from that, there is a series of elections coming and there will be all sorts of talk but the Stability Pact is an agreement that will be ratified. If there is a parallel statement at the end of it, we would agree to it. We shouldn’t just stand back. We want to be part of curing the problem of not just Ireland, but the eurozone.
Howlin: We can incrementally solve our problem. The Personal Insolvency is an “extraordinary, ground-breaking” piece of legislation and people who understand it know how complicated it is to get it done.
And with that the press conferences comes to an abrupt end. They were at it for just under an hour.
So the main points from that briefing were:
In general it was not a very fraught affair and the government appear pleased with how the programme is progressing. The comment about queues of families for new housing from Michael Noonan was interesting and a bit surprising but aside from that no real controversy.
That’s all from us. Join us again for more liveblogging adventures in the near future.
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