Noonan: Tougher budget this year

Next December’s budget will be tougher than last year’s because “all the low hanging fruit has been plucked” and the Government still has to make the same level of cutbacks, Michael Noonan has said.

Speaking at the Financial Services Ireland annual lunch yesterday, the finance minister said the economy had come through many tests over the past few years, but the biggest test remained whether the Government could successfully return to the sovereign debt markets.

“We have fulfilled all the conditions of the [EU/IMF bailout] programme. We have drawn down 78% of the available funds and we have implemented 120 measures of the programme. Along with the major fiscal adjustment, there has been a major restructuring of the economy and we have made the economy more competitive to grow in the future. If the test was to meet the 120 measures then we were successful. But the real test of success is getting back on the markets at a reasonable rate.”

Mr Noonan said because of the level of debt, which is forecast to peak between 117%-119%, it is like driving the economy with the handbrake on. “We have been treated very well by our EU colleagues in every way except the bank debt. We had to carry the full burden of bailing out our banks. We are now in talks with the troika about that.”

The release of funds by the ESM into the banking system is dependent on having a single European banking supervisor in place and agreement among all eurozone finance ministers on how to recapitalise the banks. That is unlikely to be completed by October, but if the markets get enough clarity by then on Ireland’s position vis-a-vis bank debt, then it will help efforts to get back to the markets.

He emphasised the importance of the financial services sector to the economy, which has created 33,000 jobs and contributes over €1bn to the exchequer.

There will be a raft of EU regulatory proposals up for discussion during Ireland’s EU presidency next year. Mr Noonan said he would “appreciate the advice” from the financial services sector on what approach to take to these regulations. He said it was important not to go back to a light-touch regulatory environment, but it was also important not to have a regulatory framework that was too burdensome.

Ireland would not support a financial transaction tax unless it was adopted by all 27 EU member states, because “we would lose business to London.”