THE GOVERNMENT will seek a renegotiation of the rescue package with the European Union and the International Monetary Fund later this year to allow it make different adjustments in budget 2012.
Minister for Finance Michael Noonan said yesterday that the manner in which the Coalition wished to draft the budget might not be in accordance with what was in the memorandum of understanding with the EU, IMF and European Central Bank troika.
Speaking in the Dáil, Mr Noonan said he was confident a renegotiation could be achieved. “As long as our approach is fiscally neutral, we will be in a position to substitute one measure for another.”
The memorandum for the last quarter of 2011 envisages a budget with corrections of at least €3.6 billion. That includes cuts of at least €2.1 billion, primarily in social welfare expenditure, a reduction in public service numbers and capital spending.
The memorandum sets out taxes to raise €1.5 billion. This would include a lowering of income tax bands and credits, reductions in pension reliefs, a property tax and an increase in carbon tax.
The new memorandum agreed last April allowed alternative budgetary changes, arising from the spending review being carried out by Minister for Public Expenditure Brendan Howlin. It stipulated that they had to be fiscally neutral.
Fianna Fáil’s spokesman on public expenditure Michael McGrath responded that the troika would have no difficulty with any change that was fiscally neutral and argued the Government had failed to renegotiate any major component of what Mr Noonan described as “a bad deal for Ireland” in 2010.
It came on the eve of teams from the European Commission, ECB and IMF arriving in Dublin today to begin the second quarterly review of the rescue programme. In all the package is worth some €84 billion, of which €67 billion has been borrowed from the EU, the IMF and four EU states outside the euro zone. The exercise is expected to last eight days, with top officials from the three agencies meeting Mr Noonan and Mr Howlin towards the end of the process.
Separately, outgoing president of the Irish Congress of Trade Unions Jack O’Connor has warned that unions may back calls for Ireland to default on its debts.
He said there was no moral justification for ordinary taxpayers to foot the bill for reckless debts accumulated by private banks. He also noted the impossibility of a small state paying some €200 billion in debts within a short timeframe as non-existent.
A Government spokesman said the Ictu leader was describing a hypothetical situation and the issue of default didn’t arise. He said the Government was committed to meeting its commitments under the deal and had done so successfully. It was confident that future targets would be met. “It’s up to him to say what he has to say. The Government will get on with its own business.”
