Ireland ‘needs change of government to tackle debt’

IRELAND may need a new government to get a grip on its debt crisis, the agency which downgraded the country’s credit rating warned yesterday.

The controversial intrusion into domestic politics came as Brian Cowen added to the economic gloom by confirming March’s tax take is likely to have nose-dived as fast as the collapse in the first two months of the year, which provoked the need for next week’s emergency budget.

Opposition parties calculated that the move by debt rating agency Standard and Poor’s to reduce Ireland’s prized AAA rating to a AA+ will end up costing the country an extra €400 millio-€1 billion in repayments next year.

Frank Gill, financial expert with the respected international agency, sparked controversy when he stated Ireland will probably “need new faces in government”.

The Government overhaul would be needed to stabilise the level of debt compared with the value of what the country produces — gross domestic product — Mr Gill told Newstalk.

The Government has given clear signals that that ratio is likely to rise above 9.5% in next week’s crisis budget — more than three times the European Union limit.

Fine Gael leader Enda Kenny seized on the Standard and Poor’s comment as a clear indication the international finance markets thought the Taoiseach should go.

“The analyst made the point that the probability is that a change of faces behind the cabinet table is needed to restore trust, integrity and confidence in the Irish financial institutions and the Irish Government,” said Mr Kenny.

“There is no confidence in the Irish Government, we have had a calamitous loss of competitiveness and the Taoiseach should go,” he told the Dáil.

The Taoiseach dismissed the remarks by the agency’s official.

“I do not know what he knows about Irish politics or what the choices are,” Mr Cowen said.

The Taoiseach also confirmed the tax take was likely to be e3bn below the estimates at the beginning of the year when the first-quarter exchequer figures are released tomorrow.

The credit ratings agency said the new branding for Ireland was based on a “negative” outlook, indicating that the state’s faltering tax revenues may result in further downgrades.

The ratings agency said the total gross fiscal cost to the Government of supporting the banks could reach e15bn-e20bn, or as much as 11% of GDP.

Standard and Poor’s said it was concerned that a “credible” strategy for economic recovery would not emerge until after the next general election, which is due to take place by 2012.

The two other main credit ratings agencies, Moody’s and Fitch, have both placed their “AAA” rating for Ireland on a “negative” watch.