Pearse Doherty (Donegal South West, Sinn Fein)
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Question 104: To ask the Minister for Finance the content, implications and cost of the modifications to the conditions underpinning the EU loans to the State under the EU/IMF support programme agreed with the EU/ECB/IMF; and if he will make a statement on the matter. [13250/11]

Michael Noonan (Limerick City, Fine Gael)
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Following the formal review mission, which concluded in mid-April, the EU/IMF Programme was updated to take account of implementation and developments since the programme was first agreed in November 2010. It was also amended to reflect Government policy priorities. The revisions were approved by Eurogroup, ECOFIN and the IMF Executive Board on the 16th and 17th of May 2011. The conditions are set out in the programme documents comprising the Letters of Intent to the EU and the IMF, the Memorandum of Economic and Financial Policies (MEFP), the Technical Memorandum of Understanding (TMU), and the Memorandum of Understanding on Specific Economic Policy Conditionality (MoU EPC). The text is available on the Department of Finance website (www.finance.gov.ie/documents/publications/other/2011/draftmoumay2011.pdf). There were a significant number of changes to the text, many of which represented a rationalisation and tidying up of the initial draft.

Key changes included the restoration of the cut made in the National Minimum Wage, provision for the Jobs Initiative, which I subsequently announced on the 10th of May, provision for the Comprehensive Review of Expenditure and agreement that the NAMA II transfers would not now proceed. Instead, the banks will be required to develop alternatives for deleveraging these loans. The commitments in respect of banking were updated to take account of the results of the PCAR and PLAR exercises and also, the Government's announcement on Banking restructuring of 31 March this year.

In addition to the changes outlined above, there were a large number of other changes, many of them technical and some new conditions were included and others were elucidated. In most cases the conditions were not entirely new. For example there is now a requirement that the Department of Social Protection will submit to Government by the end of March 2012 a comprehensive programme of reforms that can help better targeting of social support to those on lower incomes, and ensure that work pays for welfare recipients. This requirement builds on the condition in the original MoU EPC to tackle unemployment and poverty traps. It also reflects commitments made in the National Recovery Plan and the Programme for Government where it states that:

"The Commission on Taxation and Social Welfare will examine and make recommendations on the interaction between taxation and the welfare system to ensure that work is worthwhile. In particular, it will examine family and child income supports,and a means by which self-employed people can be insured against unemployment and sickness."

Another example is the inclusion of the requirement to complete the comprehensive review of expenditure by the end of September this year. The original Programme already contained commitments for budgetary corrections of EUR3.6 billion in 2012 and EUR3.1 billion in 2013 assigned in a ratio of approximately 2:1 between expenditure and taxation measures. The revised text notes this pre-existing commitment, and the detailed measures which accompany it. It then goes on to say, in respect of 2012 that "a Comprehensive Review of Expenditure (CRE) is underway and will be completed in September 2011. The budgetary measures outlined will be examined by the Government in the light of the findings of the Review and the Programme for Government. Based on the CRE and in consultation with the European Commission, the IMF and the ECB, the government will introduce budgetary changes which will aim to fully realise efficiencies identified, while remaining fiscally neutral". Similar text is included for Budget 2013.

In relation to the question of the cost of modifications to the conditions, the overall fiscal targets remain in place and the resources available to deliver all the conditions/actions required under the EU/IMF Programme are unchanged. It should be noted that the fiscal consolidation targets are unchanged. The detailed quarterly Exchequer primary deficit and net debt targets for the remainder of 2011 have been amended slightly and initial targets have been set for the first quarter of 2012.

There is one potential cost that the Government is fully cognisant of at all times and that is the potential cost of failing to comply fully with the fiscal targets and the conditionality of the Programme which could be very high for the Irish economy and people. This is why the Government is fully committed to the full delivery of all the requirements of the Programme.