Monetary adjustment ‘means to an end’

THE Government is still hopeful of keeping next year’s budgetary adjustment target at €3.6 billion, but said that any increase that might be made will be “marginal”.

Finance Minister, Michael Noonan is set to outline next year’s budgetary targets in early November, ahead of full details on December 6.

Speaking yesterday, at the completion of the third EU/IMF/ECB quarterly review of Ireland’s recovery programme, Mr Noonan said that getting the country’s budget deficit down to 8.6% of GDP in 2012 is the real target and that the monetary adjustment figure is a means to that end.

He said that if the 8.6% target can be reached through a €3.6bn adjustment, then it will be; but the final ‘correction’ won’t be clear until the full tax returns for October and November are known.

On the issue of the banks, the Minister added that the Department of Finance is evaluating bids for the insurance arm of Irish Life & Permanent (IL&P) and an action plan is being developed to address the group’s challenges.

Mr Noonan said that any further bank recapitalisation needs — if any — would only be known after this weekend’s EU summit.

The Government has a 2015 deadline to get its budget deficit down to 3% of GDP.

While some economists have suggested trying to get it down to 1% by that date, Mr Noonan said that 2015 wasn’t an endgame scenario and growth and discipline need to be the focus for the years ahead and not just for the next four years. He called the 1% target “a bridge too far” — an opinion shared by IMF representative, Ajai Chopra.

For its part, the troika noted, yesterday, that Ireland is on course to meet its targets and has met all targets to date, adding that the rescue agreement is working.

Its representatives said that upcoming Budget measures would be determined by Government, but would be assessed by the troika in the coming weeks also.

Mr Chopra noted that some downside risks still exist; such as poor domestic demand and falling international demand for exports. He also said more progress was needed from the banking sector, including the further sale of non-core assets and an improvement to the quality and transparency of their balance sheets. Klaus Masuch of the ECB, meanwhile, said unemployment levels here are still at an “unacceptable level”.

Mr Noonan said he was pleased with the troika. He said the programme remains on track and that Ireland “is making substantial progress in all the key areas”.