IMF concerned over Irish budget progress

The International Monetary Fund has raised its concerns about the Government’s decision not to implement austerity measures in Budget 2015.

After an IMF team finished its five-day visit to Dublin yesterday it issued a statement congratulating Ireland for completing the troika fiscal programme, but warned that straying from the approach could be risky with eurozone growth prospects still very uncertain.

The statement said Budget 2015 “shows fiscal restraint but makes less progress than desirable”.

The Cabinet’s decision not to implement another budget of cutbacks and tax hikes was noted by the IMF and they urged it to use any surplus revenue or savings to lower the deficit.

Meanwhile, European Central Bank president Mario Draghi threw the door wide open yesterday for more dramatic action to rescue the eurozone economy, saying “excessively low” inflation had to be raised quickly by whatever means necessary.

Mr Draghi said there was now no sign of economic improvement in the months ahead and that the ECB would expand and step up its programme to pump more money into the currency bloc if its current measures fell short of lifting inflation.

“We will continue to meet our responsibility — we will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us,” Mr Draghi said in a speech at an annual banking congress.

“If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialise, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases.”

“Draghi all but announced that the central bank will step up monetary easing soon. Mr Maybe has become Mr Definitely,” said Nick Kounis, an economist with ABN Amro.

“We think the ECB would exhaust other alternatives before moving to sovereign QE.”

Mr Draghi had said on Monday further measures could involve large-scale purchases of government bonds, also known as quantitative easing .

The head of Germany’s powerful Bundesbank, Jens Weidmann, in his speech at the same event, avoided the subject of monetary policy and instead spoke about banking regulation.

Mr Draghi’s comments pushed 10-year government bond yields in Ireland, Italy, and Austria to new all-time lows. The euro fell 0.8% against the dollar and was down 1.1% against the yen. Mr Draghi’s remarks were almost as dramatic as his “whatever it takes” speech in the summer of 2012 with which he pulled the eurozone back from the brink.



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