Growth is the new mantra as gloom intensifies

On a gloomy note and under dreary skies, the bailout troika packed their briefcases and left Ireland after the halfway review of the bailout programme.

They left behind important messages about how the economy is likely to develop and the country’s chances of getting out of the bailout programme and regaining our much-lamented economic sovereignty.

The first message is that two undependable factors are needed to get back on track: Improved performance by trading partners to increase exports and the stabilisation of domestic activity.

For this reason, and striking a more positive note, the second message was that the bailout programme will shift its focus slightly away from austerity and more towards growth.

When he had returned to Washington yesterday following his visit, the IMF’s mission chief to Ireland, Craig Beaumont, held a telephone conference to explain to journalist how it went.

He said there was an “intensified focus on growth” in the programme, which has often been criticised for being austerity-heavy, with too much focus on cuts.

The shift was on trend with events of the past week when there has been a political momentum towards more pro-growth strategies to deal with the economic crisis.

The man likely to be French president in two weeks, François Hollande, has promised he will travel to Berlin and tell Angela Merkel that he wants more of an emphasis on growth and will block ratification of the EU fiscal treaty if he does not get it.

This view was supported on Tuesday by Mario Draghi, head of the ECB, one of Ireland’s bailout partners, who suggested he would be in favour of a “growth pact”.

In keeping with the growing chorus in favour of growth, which comes just a month away from the referendum on the EU fiscal compact, the revised memorandum with the bailout partners contains a commitment “to strengthen the growth pillar of the programme.”

The EU, ECB, and IMF have agreed to allow more of the proceeds from state assets be made available for job creation.

But this is not the only option being considered as part of “the broader growth strategy”, according to Mr Beaumont.

This could be seen as an acknowledgment that austerity alone is not working, or a shift in strategy ahead of the referendum vote.

But it’s most likely a necessity born of the fact that Ireland will not be able to rely on export growth next year and needs to get the domestic economy moving.

“The intensified focus on growth reflects the fact that the trading partner process is now somewhat weaker than we had originally programmed,” said Mr Beaumont. “So that indicates we would have to make additional efforts in this area.”

He said gains this year were “hindered by low trading partner growth”.

While growth last year was 0.7% it will be 0.5% this year according to the IMF because “the impulse from exports is smaller this year than it was in 2011”.

Finance Minister Micheal Noonan expects the Government’s own revised forecasts for growth, to be announced on Monday, will be closer to 0.8%.

Mr Beaumont would not commit to a date for Ireland to begin borrowing on the private market again.