Dáil debates

Wednesday, 12 January 2011

2:30 pm

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 68: To ask the Minister for Finance the full extent to which he, the Governor of the Central Bank and the Regulator are in ongoing dialogue with the EU Commission, the International Monetary Fund and the European Central Bank in the matter of the achievement of the various targets set by him and agreed with these institutions in the context of the EU stabilisation bailout arrangements entered into and provided for in Budget 2011; if attention is being drawn by any of the parties to aspects of the proposals that may have fallen short of the set targets; if any proposals have been made or actions taken with whatever regularity in the period since the budget date; if any further corrections are contemplated over the next six months in this regard; and if he will make a statement on the matter. [1362/11]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
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As is normal in these circumstances, officials of my Department are in ongoing contact with their counterparts in the EU Commission, the IMF and the ECB with regard to implementation of the joint programme of financial assistance agreed for Ireland. I understand that frequent contact is also taking place between the staff of the Central Bank, the Financial Regulator's office and the external funding agents.

The policy conditionality associated with the EU-IMF programme for Ireland is set out in the memorandum of economic and financial policies and in the memorandum of understanding on specific economic policy conditionality. These documents, together with the technical memorandum of understanding, which are collectively referred to as the MoU, have been laid before the Houses of the Oireachtas.

As regards the fiscal consolidation aspects of the agreement, as the Deputy will be aware, the release of the first instalments of financial assistance is conditional on the successful adoption of budget 2011. In this regard, the Social Welfare Act 2010 is in force and the finance Bill 2011 is due to be published on 20 January 2011. As part of the quantitative performance criteria of the technical memorandum of understanding, a target for the end-2010 Exchequer primary balance – the Exchequer balance excluding debt interest payments – of minus €15.3 billion was set. Excluding debt interest payments of just under €4.1 billion, the Exchequer primary balance in 2010 was minus €14.65 billion, meaning the target was met. This data was relayed to the IMF, European Commission and European Central Bank on Wednesday, 5 January. I can also confirm that the data provision obligations on my Department, the NTMA and the Central Bank are being pursued in line with annex 1 of the memorandum of understanding. The technical memorandum of understanding also set targets for cumulative end-quarterly Exchequer primary balances in 2011. There has so far been no reason to change these targets.

In the financial sector, the Deputy will be aware that the memorandum of understanding sets out a deadline of end-December 2010 for agreement with the Irish authorities and the ECB, European Commission and the IMF on agreed loan to deposit ratios for each of the banks. However, following further discussions with the ECB, EU and IMF, it has been agreed that it would be more appropriate to decide on the loan to deposit ratios for 2013 when the information from the prudential capital assessment review and the prudential liquidity assessment plan is available. This does not in any way diminish the commitment to appropriate restructuring of the banks in the relevant period.

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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Since the House last met, the lead negotiator on behalf of the International Monetary Fund, Mr. Chopra, and the Governor of the Central Bank, Professor Honohan, have both stated publicly that it is open to a new Government, following an election, to renegotiate with the lending agencies in respect of the terms of an agreement. Is this also the Minister's position?

In light of the point raised by Deputy Noonan about the Croke Park deal, which was negotiated last April and came into effect last June, what savings have accrued to the economy to date from the deal?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
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I agree with the views expressed by the Governor of the Central Bank in this matter in their entirety. What the Governor said was that it is available to any future Government, as it is to this Government, to renegotiate the fiscal and compositional elements of the EU-IMF agreement. He did not say that the rate of interest or the total quantity of the adjustment can be renegotiated. What he indicated and what has been clear from the inception of the agreement is that the relevant balance of tax and expenditure and relative weight to be attached to different expenditures can be adjusted, albeit only in a fiscally credible way. That is the position and it is the constraint that will apply to any Government.

The rate of interest and the total amount that must be secured over the programme period of three years are fixed by the agreement. I agree it is somewhat confusing that the programme period is three years because the plan period is four years and the Stability and Growth Pact period is five years. As far as the programme period is concerned, the total amount that must be secured within the period and the interest rates are fixed, while the other matters are up for discussion.

On the Croke Park deal, I do not have information on the matter raised but I have dealt with it in answer to Deputy Noonan.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Given that we are in a transition period to a general election and a likely change of Government, does the Minister agree that it would be appropriate for the information supplied to the International Monetary Fund and European Union by the institutions to which the Minister referred to be made available to the Opposition parties at the same time as it is provided to the IMF and EU?

On a related matter, will the Minister agree to put in place contingency arrangements given that a change of Government is likely prior to the conclusion of the first reporting period at the end of March 2011, as set out in the memorandum of understanding? In the run-up to the most recent general election in the United Kingdom, contingency arrangements were made for the change of government. Is it not appropriate, therefore, to have in place contingency arrangements with the Opposition with regard to this terribly important matter?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
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I will reflect in a constructive way on the two requests made by Deputy Burton. While I am not in a position to confirm this afternoon that I will comply with her request that certain information which is being transmitted should also be transmitted to the Opposition, I will consider it in a constructive way. The Deputy's second request related to contingency arrangements. It is not clear whether she is referring to contingency arrangements in the lead up to the poll or in the period after the poll.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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That will depend on the Green Party and the date of the election.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
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I can confirm, however, that there will have to be contingency arrangements in place immediately at the conclusion of the poll. That is of vital importance.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Will the Minister indicate the date of the election?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
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It will be held in the spring.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
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The period for adjustment for meeting the Stability and Growth Pact target has been extended by one year to five years. The original period the Government agreed with the European Union institutions was four years. Does the Minister accept that the EU having to arbitrarily extend the period by one year demonstrates a complete failure of the Government's negotiations with the EU institutions? The Government was told by my party at the time that it had failed as it would take six years to meet the target. Similarly, does the Minister agree that the targets arrived at in the deal with the International Monetary Fund and European Union institutions under the bailout constitute an utter failure on the part of the Government because they cannot be met?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
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We are now back to the realm of political charge and counter-charge.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
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The facts. The EU gave the Government an extra year.

Photo of Brendan HowlinBrendan Howlin (Wexford, Labour)
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Deputy Morgan should allow the Minister to reply so we can deal with one more question.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
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The negotiations resulted in a good arrangement for this country, which confirmed the national recovery plan the Government had already adopted. The Government had already embarked on contingency planning for the difficulties we face in respect of funding the State. Those contingency plans were finally formulated in a national recovery plan, which is the sovereign decision of the Irish Government and was accepted by the international authorities.

Photo of Michael NoonanMichael Noonan (Limerick East, Fine Gael)
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The Minister referred to the impossibility of renegotiating the very high interest rate attached to the package. With respect, he is not correct. The rate is renegotiable but not at the level of the Minister for Finance; it is renegotiable at the level of Council of Ministers and heads of state, obviously because everything is. Does the Minister realise that when the first tranche of money was transferred to Ireland, it was borrowed by our partners in Europe under their guarantee at 2.9%? That element was lent on to Ireland at a rate in excess of 6%. This is the first time the EU decided to make a profit in providing funds to member states. It confirms the very bad negotiation conducted by the Minister and his officials. These negotiations should be re-entered.

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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It is useful to get the Minister's view, which is the same as that of Professor Honohan and Mr. Chopra, that renegotiation is possible. Once there is agreement on general parameters and we sign up to the targets, the ways and means of achieving the targets are a matter for the new sovereign Government. The Minister is ad idem with others.

We are eight months into the Croke Park deal. Can the Minister tell us, in money terms, how much has been saved?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
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In response to Deputy Noonan, the interest rate charged to Ireland was raised with the EU authorities at a press conference earlier this afternoon on the new growth survey. Commissioner Olli Rehn pointed out that the interest rates charged to Ireland are in line with Council decisions last year on the euro area loan facility to Greece following intensive discussions with member states. That is the position on the interest rates.

Photo of Michael NoonanMichael Noonan (Limerick East, Fine Gael)
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Until the position changes.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
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I take it Deputy Noonan is not questioning the IMF interest rates, which are locked in, nor is he questioning the stability mechanism, which is also locked in. He is envisaging renegotiating with 27 member states. That is theoretically possible but to suggest there were bad negotiations because we have a better arrangement than Greece, which Greece subsequently sought, is inaccurate and misleading.

Regarding the Croke Park agreement, the figures in this year's Estimates reflect the savings that can be procured from the Croke Park agreement.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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What about last year's savings?

Photo of Michael NoonanMichael Noonan (Limerick East, Fine Gael)
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Is not every policy change made on the basis of 27 member states agreeing?