Lack of growth ‘threatens democracy’

Over the next two months, Ireland should see substantial changes to its debt situation as the country prepares for a full return to the markets, but lack of growth posed a threat to democracy, Finance Minister Michael Noonan warned the EU.

On the cards for Ireland is a lengthening of the pay-back period for more than €40bn of bailout loans to at least 30 years; a possible cut in the interest rate; a cheap line of credit from the EU’s rescue fund; and the ECB being willing to buy government bonds.

This comes on top of indications that the talks with the ECB to cut the immediate cost of repaying €31bn billion of promissory notes are progressing well, while by June, the Government should know if it can get a deal on the other bank debt of €32bn.

Mr Noonan was not talking up any of the developments as he chaired his first meeting of the EU’s finance ministers that agreed to allow 11 countries to go ahead with imposing a tax on financial transactions such as selling shares and derivatives. Ireland is among those opting out.

Hopes of easing the debt burden were boosted by European commissioner Olli Rehn when he said they support extending the maturities of the loans — some of which have been as short as four years. He could not put a figure on how much would be saved but Mr Noonan said it could save “billions of euro”.

Mr Rehn also revealed that the troika was working on a paper requested by the Government detailing what other ways they could help Ireland exit the bailout programme and return to borrowing on the markets.

He promised to have the proposals ready within weeks and they would include a precautionary line of cheap credit from the rescue fund, the ESM, to be drawn down by the Government should it be needed, and it could be combined with the ECB buying Irish government bonds on the markets.

Mr Noonan said they still had not decided whether to avail of the ECB’s bond-buying programme known as OMT (outright monetary transactions) but he credited its existence with helping to drive down the cost of the country’s borrowing on the markets that has fallen dramatically in recent weeks.

However, the minister warned that while the crisis was easing there was now another risk that had to be dealt with — that of unemployment and hardship.

“The big risks now are on the social side. There is not much use having a great balance sheet if the lives of people are not improved. The level of unemployment and youth unemployment is far too high for sustainable democratic countries,” he told members of the European Parliament.

People in the bailout countries were finding the costs were very, very high with services cut back, taxes increasing, pension age rising, a cut in family incomes, and in their standard of living.

“This is all done on the basis that if one endures this for some time that success will follow and we should not under estimate the difficulties that families are having in bailout countries.

“We should reach out to young people in particular — it’s not sustainable, not compatible with the ongoing future of democratic states that unemployment should be so high,” he said.

The proposals to ease the debt were welcome, but lending money and imposing austerity must be balanced with strategies for growth.

“Growth is essential,” he said, adding that this was why Ireland’s motto during its EU presidency was growth and jobs.