Ireland may choose to exit its bailout programme without the support of a precautionary credit line, the Minister for Finance said yesterday following a meeting with the International Monetary Fund in Washington.
"The option of not having a programme is still a strong option," Michael Noonan said following the meeting with the IMF's top officials, including its deputy managing director, David Lipton, and head of its European division, Reza Moghadem. "It's still an open question. It's finely balanced . . . We're funded into 2015 so we're not taking a big risk to go it alone," he said.
He noted that Irish government bond yields had fallen since Taoiseach Enda Kenny's speech to the Fine Gael party conference two weeks ago, which stressed that Ireland had €25 billion in reserve. "[Since that] our spreads have come in. We're down at around 3.5, that's down from nearly four over a period of a month, so the markets have a good perception of us at the moment."
Exit strategy
The Minister said that a decision on an exit strategy for Ireland would not be made until a new government is formed in Germany. "It's not really possible to make a decision while there's no government in Germany . . . I understand the SPD [Social Democrats] are having their conference around November 15th. There can't be a commitment before that, so I suppose [a decision will be made] between that and the end of November," Mr Noonan said.
He was speaking before a private meeting with IMF managing director Christine Lagarde at the Irish Embassy in Washington last night. He will fly to the Hague next Tuesday to meet the head of the Eurogroup of finance ministers, Jeroen Dijsselbloem, to discuss Ireland's exit strategy.
Mr Noonan’s comments also come as the troika starts its final visit to Dublin today, when the question of the emergency credit line is expected to dominate. But they are also expected to scrutinise the budget against the backdrop of uncertainty over the assumptions made, particularly in relation to health spending.
Gather information
Mr Noonan said yesterday's meeting with officials at IMF headquarters had been "very constructive" but stressed that its main objective was to gather information. "What we're trying to do is establish what the principals of the troika are thinking about Ireland's exit," he said, adding that the detail of the duration or conditions attached to any precautionary credit line had not been discussed. "We're not at that stage yet."
Both the euro zone’s rescue fund, the European Stability Mechanism, and the IMF offer precautionary credit lines for countries that are leaving programmes. Mr Noonan said while theoretically it could be possible to seek an IMF credit line on its own, it was not something he pursued.
"I'm sure that at the board of the IMF the non-European countries would want to know why a European country was being given solely IMF money without Europe sharing in it," he said.
Jointly funded
Ireland will be the first country to exit a programme jointly funded by the Washington- based IMF and the euro zone authorities.
Portugal indicated last week that it intends to request a precautionary credit line early next year as it prepares to exit its €78 billion bailout in June.
