‘Irish post-bailout reforms needed’

Fiscal consolidation and structural reforms will have to continue for a number of years after Ireland exits the EU/IMF bailout programme at the end of 2013, according to Istvan Szekely, the European Commission’s mission chief for Ireland.

Speaking in Dublin yesterday, Mr Szekely said: “It was a concern that the level of credit in the economy is below when the programme started.”

He cited a number of reports in recent months that pointed to a lack of demand among companies looking for credit and problems with the banking system transmitting credit.

Overall, Mr Szekely gave an upbeat assessment of the economy. When the bailout programme comes to an end next year he said it would be one of the rare occasions when “I, as well as you, will be glad I am out of a job”.

He noted the economy had regained most of the competitiveness it lost during the boom. Compared with other EU countries, Irish competitiveness levels are now back to 2001 levels. But there was still a lot more to do, he added.

Most of the competitiveness gains have been made in the private sector, which gives the economy a good platform for growth in dynamic industries.

Mr Szekely said: “But when we (the troika) looked into the non-tradable sectors of the economy — into the public sector, the legal services, and other professions — we found room for major reforms.”

He acknowledged there had been a lot of reforms across the public sector, “but the job is far from done”.

One of the main social consequences of the crisis was long-term unemployment. More supply-side measures were needed to increase job activation, mainly retaining and upskilling, he said. The export sector is creating jobs, but still not at a rate that jobs were being lost in other parts of the economy.

Contrary to popular perceptions across the EU, Irish disposable income per capital was below the eurozone average and on a par with the EU average, he noted.

Mr Szekely denied there was a democratic deficit at the heart of the bailout programme. It was up to the Government to determine how the budgetary adjustment took place. “It is the troika’s job to oversee the process,” he added.

Regaining lost competitiveness was difficult in this country because short-term measures such as currency devaluation were not an option. Instead cuts had to be made to wages and the cost base. But just as important as getting the Government’s finances back in shape and regaining competitiveness was repairing the banking system and making it fit for purpose again, he said.