Ireland’s economic problems are of its own making and the country should consider making a larger adjustment than expected in the upcoming budget, a senior banking figure has said.
Goldman Sachs International chairman Peter Sutherland said he agreed with Jurgen Stark’s conclusion that the Government should front load cuts outlined in the bailout plan, capitalising on improving market sentiment towards Ireland.
Speaking at the Institute of International and European Affairs in Dublin today, he said Ireland had a “brief” opportunity to surprise the markets and put “clear blue water between ourselves and others”.
Mr Sutherland said much of the criticism of the response by euro zone member states to Ireland's crisis was unfair, noting that although the interest payable on the EU portion of the bailout was too high, it was lower than the markets would have demanded.
“The question is legitimately asked why countries with large fiscal deficits continue to maintain costs in their economies that are far higher than in the donor countries who are bailing them out,” he said.
Mr Sutherland said Ireland has a vital interest in sustaining the euro, while countries such as Germany were committed to keeping the project alive.
“The next period of weeks will be of great importance and potentially dangerous not least because many countries including Germany still have to adopt the legislation necessary to give effect to the agreement of July 21st increasing the funds of the EFSF to €440 billion,” he said. “Greece is of course another reason for concern.”
Mr Sutherland said there was no avoiding what must be done in Ireland, with planned measures including the reduction of the budget deficit by at least €3.6 billion.
“Markets are not forgiving and we cannot fail to reach this target and, as I have said, I think that we should look seriously to going somewhat further,” he said. “The bottom line is that taking account of various factors not recognised in our programme we must look again at the €3.6 billion to establish if it is enough.”
These factors include reduced gross domestic product in 2012, and a poorer global economic environment than previously thought.
“We have no alternative but to pursue difficult policy options and the commendable resolve of the Government should not be undermined by those who apparently fail to recognise how serious our position remains,” Mr Sutherland said.
