INTERVIEW: Minister rejects claims from the Opposition that interest rate being paid for the EU-IMF bailout too high
MINISTER FOR Finance Brian Lenihan stressed last night that he was in good health and able to do his job.
He said that while he would, like everybody else involved in politics, aspire to the leadership of his party, he did not contemplate a vacancy.
Mr Lenihan said that he believed Brian Cowen would lead Fianna Fáil into the forthcoming election.
He said that in some of the commentary about the party leadership in recent months, there had been reference to his health.
“I am concerned to address that issue, because at present, the task of Minister for Finance is a very onerous one and I want the public to be reassured that I am in good health,” he said.
“I have had very, very busy times since late August and I have been working all the time. I have been in this department a lot. Certainly I have been working seven day weeks for some time, working continuously, liaising with officials, international authorities and my colleagues in Government.
“Clearly that is very important and I have been very busy and it hasn’t impacted on my health, thank God.”
Mr Lenihan said that officials in his department were already working on the Finance Bill and he expected that it would be ready by the middle of January.
“I appreciate the fact that there is an anxiety to get the Finance Bill quicker. We have started work on the Finance Bill but it is not possible to enact it before Christmas. It is a detailed measure.” He said that normally the Finance Bill debate lasted seven or eight weeks but clearly it could be reduced, although he added that it would deserve serious consideration from both Houses of the Oireachtas.
“There is an amount of legislation to be passed in the wake of the budget which will be passed before Christmas, as well as the Appropriation Act which has to be enacted or nobody would be paid anything on January 1st.
“The Finance Bill is under preparation in my department already. There is no way that the Bill can be prepared in a comprehensive way before mid-January and it will be published in the middle of January and it will have to go through the normal parliamentary stages.”
Mr Lenihan rejected claims from the Opposition that the interest rate being paid for the EU-IMF bailout was too high.
“The basic fact about any sovereign borrowing is that the longer a country borrows money, the higher the interest rate paid.
“If we didn’t do a longer term borrowing we would be quickly viewed by the markets as incapable of financing the wall of debt that would emerge say after three years and that is precisely what happened to Greece.
“That is why as soon as the Irish arrangement was disclosed at the euro group, the Greeks sought to align themselves with Ireland. So, far from Ireland getting a worse deal than Greece, Ireland got a better deal than Greece and Greece now wants the Irish arrangement.”
He said it was important to remember the European Central Bank was already pumping over €100 billion into the Irish banking system at a rate of 1 per cent.
“So the suggestion in the public debate that Germany is exacting reparations from Ireland is untrue.” Mr Lenihan said before the deal was finalised, there were suggestions that the rate could be as high as 7 per cent but it had been locked in at 5.8 per cent.
He said there were different rates from the three different funds. The European facility was at a rate of 6.05 per cent, the commission rate was 5.7 per cent and the IMF rate was at 5.7 per cent.
The Minister said that of the €67.5 billion coming from the outside bodies, €50 billion was being made available to fund the State not the banks.
“That is to pay for pensioners for Garda salaries for nurses salaries and for whatever other purposes the State spends money. It is so important we focus on this because I have heard people, including Enda Kenny, talking about a mountain of debt. The mountain of debt is because of our wish to spend this money on ourselves not our banks.”
He said the Government had looked at the issue of some of the unguaranteed senior bondholders being asked to take a discount.
“The view of European Commission and the European Central Bank was that they couldn’t entertain a programme constructed on such a basis. Now I think that is very important in our domestic debate because I think it is totally unrealistic to think you can do anything about those obligations without the support of the European Central Bank.”
Mr Lenihan said the issue of Ireland’s corporation tax rate had been raised by various parties before the Government made its formal application.
“Prior to making a formal application, that issue was dealt with. Once the formal application was lodged it was clear that the issue of tax harmonisation was not on the agenda for the talks and that was very welcome and it did not surface in the formal negotiations.” He defended the cut in the minimum wage, saying it was a crucial part of labour market reform.
He said the EU, the ECB and the IMF had all said the labour market had to be reformed.
“The biggest factor on the structural side that convinced them that the Irish Government meant business, was the proposal on the minimum wage.”
