EU should aim for more, not less in bid to contain troubles

There was no quick response, as an economic problem became political

AJAI CHOPRA’S message seemed aimed at the EU and ECB gentlemen alongside him — or perhaps more accurately their superiors in Brussels and Frankfurt — rather than the Government.

It was “critical” for Europe to “dispel the uncertainty” created by “what is perceived by markets and many as an insufficient response” to the eurozone debt crisis, he said.

Prompt implementation of “consistent, cohesive and co-operative policies” was required. “We need a European solution to a European problem,” the IMF man said.

Yesterday’s press conference, concluding the latest quarterly review of the Government’s adherence to the bailout programme provided by the troika of the EU, ECB and IMF, was supposed to be about Ireland. And mostly, it was. Mr Chopra was joined on stage by Istvan Szekely of the European Commission, Klaus Masuch of the ECB and Amadeu Altafaj, a spokesman for European Economic Affairs Commissioner Olli Rehn.

They announced that Ireland was meeting its targets under the bailout and the programme remained “on track and is well financed”.

Mr Szekely said the Government’s ownership of the programme was “strong” and implementation “steadfast”. The positive verdict was important, because it allows for the latest tranche of funding under the bailout — €4 billion — to be released to Ireland.

After delivering their verdict, the troika reps took questions from journalists, and this is where it got interesting.

When Greece first got into trouble, many economists warned of the risk of contagion sucking in other peripheral member states unless the crisis was dealt with quickly and comprehensively. But there was no quick and comprehensive response from the EU, because an economic problem became a political one, with politicians and bureaucrats at odds over what exactly should be done. The IMF was not best pleased with the EU’s limited response.

Ireland was sucked into the quagmire, and Portugal followed. Despite that, some within the EU and ECB claimed their limited response had been successful, because the contagion had been contained to peripheral states and larger countries such as Spain and Italy had not been affected.

But for the last couple of weeks, the wolves have been at the door of Italy, in particular, and Spain to a lesser extent.

In Finance Minister Michael Noonan’s view, the EU has finally woken up and realised band-aids are not enough, and a comprehensive solution needs to be found.

The last two weeks have been a “game changer”, he believes, because his fellow finance ministers across the EU now see the debt crisis “as a euro problem” rather than one confined to the three bailed-out states.

But just in case the EU still had not completely got the message, Mr Chopra sought to drive it home yesterday.

At a similar press conference three months ago, Mr Chopra spoke about how the Fine Gael-Labour Coalition put its own stamp on the bailout deal which the previous government had agreed with the troika.

It was, the IMF man insisted at the time, using a phrase famous in domestic politics, an “Irish solution for an Irish problem”.

But three months on, an Irish solution to an Irish problem won’t be enough, and so he announced yesterday that he wanted to revise his statement from three months ago. Hence the need for a “European solution to a European problem”.

Ireland, he insisted, was both completely on track with the bailout programme and returning to growth, but wasn’t getting the recognition it deserved from the markets for this progress. Proof of this came in the decision by ratings agency Moody’s earlier this week to downgrade Ireland’s credit rating to junk status. Moody’s decision, Mr Chopra opined, stemmed from the ongoing fears of contagion and effectively ignored Ireland’s progress under the bailout: “If it wasn’t for contagion risks, we would be seeing significantly lower spreads (borrowing costs) in the case of Ireland.

“If it were not for contagion, we would be seeing a very different result. The country needs to be judged on its own merits.”

Mr Chopra welcomed the new package of measures proposed by eurozone finance ministers following a meeting last Monday, and said it was crucial that these be implemented promptly.

“I would emphasise ‘prompt’ and I would emphasise ‘implementation’,” he said.

“The problems that Ireland faces are not just an Irish problem, of course. They are a shared European problem, and what we need, and what is lacking so far, is a European solution to a European problem.”

The message couldn’t have been clearer. EU leaders are likely to meet for an emergency summit on the issue next week, to see if they can agree on the proposals put forward by the finance ministers and possibly go even further. More rather than less, it seems, should definitely be the ambition.

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