EUROPEAN COMMISSIONER for economic and monetary affairs Olli Rehn has backed the Government’s four-year budgetary strategy and called for a political consensus in support of it.
Speaking at a press conference after a two-hour meeting with Minister for Finance Brian Lenihan in Dublin last night, Mr Rehn said it was always to the benefit of a country in a difficult situation if a cross-party consensus could be found.
“In the current political situation in Ireland, irrespective of party political differences . . . it would be of great benefit for Ireland if broad political support for the necessary corrective measures of structural reform could emerge.”
Mr Rehn said he wanted to endorse the Government’s four-year plan involving an adjustment of €15 billion and its decision to frontload an adjustment of €6 billion in the December budget.
“Ireland has been a low-tax country,” he said, but now it was time to lean towards becoming a “normal tax country” in the European context. But he would not be drawn as to whether he was including corporation tax in this.
He said his discussions with Mr Lenihan had been “substantial and frank” and the message from the European Commission was that it supported Ireland and its citizens as they faced into the challenges ahead.
Mr Lenihan was critical of the statements made by the French and German governments about a possible default on sovereign debt as part of any bailout process and said he had conveyed his views to them.
Today, Mr Rehn will hold separate meetings with representatives of Fine Gael, Labour and Sinn Féin at the European Commission office in Dublin. He said he would listen to their views but will also be giving them the perspective of the commission.
He will also meet delegations from the Irish Congress of Trade Unions and Ibec, as well as Prof Patrick Honohan, the governor of the Central Bank. In the afternoon he will deliver a lecture at the Institute of International and European Affairs, before returning to Brussels.
The Cabinet has had a number of meetings over the past week to try to agree next year’s cuts package and will consider the matter again today.
However, there has been growing opposition from within Government ranks to the prospect of cutting pensions in the budget with the Green Party and a number of Fianna Fáil backbenchers expressing strong opposition to any such move.
Green Minister of State Mary White has come out against any pension cuts and her stance is supported by her two Cabinet colleagues, John Gormley and Eamon Ryan.
Fianna Fáil TD for Cork North Central Noel O’Flynn joined a number of colleagues in expressing opposition to a cut in the old-age pension and said he would resign the party whip and vote against the Government if the measure was included in the budget.
Mr O’Flynn said he believed there were six or eight TDs in the party who would have difficulty in supporting such a pension cut.
Minister for Enterprise, Trade and Innovation Batt O’Keeffe said yesterday that the Government had “no choice” but to look at “all options” for cuts, including pensions.
Speaking in Galway, Mr O’Keeffe said he was aware of comments made by both Fianna Fáil and Green Party colleagues on the issue, but insisted “all areas will be looked at”.
Minister for Justice Dermot Ahern denied the Cabinet was split over the prospect of pension cuts. Mr Ahern said nothing could be ruled out and said he had not heard any Cabinet members speak out on the subject.
“There’s no Cabinet split; we are discussing all of these issues and while I might read things in the paper about, you know, Cabinet split and all of that, it’s not true,” he told reporters in Brussels on the sidelines of an EU justice ministers’ meeting.
With political uncertainty growing and investors wary of buying Irish assets given Germany’s determination that bondholders will foot a greater share of future bailout bills, the Government is battling to turn the tide of negative sentiment.
The premium investors demanded to hold Irish debt rose again yesterday, extending a month-long climb that has seen Irish borrowing costs reach record highs on a near daily basis.
“I think the market has given up on them,” said Alan McQuaid, chief economist with Bloxham Stockbrokers. The problem on the international bond markets is now so serious that it may not make much difference whether or not there is a general election as it is now being widely assumed that Ireland will have to avail of the EU/IMF rescue package early in the new year.
While Ireland is fully funded until the middle of next year, there are real concerns the Government will not be able to resume borrowing in January.
