Austerity is here to stay, says trenchant ECB

Austerity is here to stay was the grim message from the ECB, and especially for countries with high debt.

Ireland’s government debt, which is 123% of GDP this year, is the third highest in the EU after Greece and Italy, and it is not expected to fall to the requisite 60% for at least a decade.

Using the ECB’s term for austerity, one of the bank’s directors, Jörg Asmussen, said: “Fiscal consolidation is here to stay given the very high debt levels in the EU.”

Only five countries are under the 60% of GDP debt limit set by the EU: Slovenia, Slovakia, Luxembourg, Estonia, and Finland.

“Not even Germany, not even France are included. This means we have to pursue sound fiscal strategies.”

He said the debt ceiling has been set by the markets for some countries, reflecting the amount of money they have to pay to borrow on the markets.

He also said that when the commission allows countries more time to reduce their budget spending, they should not lose sight of the clear aim to reach 60% of GDP debt. In Ireland’s case, the troika has emphasised getting state spending closer to what is taken in in taxes each year, and the shortfall has been adding to the longer-term debt, as has the huge sums used to bail out the Irish banks.

The troika is “a bit of a stranger” that emerged in a crisis mood, but it will remain working with bailout countries for the time being, said Mr Asmussen.

“We have no alternative now to the troika, but in the longer term we should return to a fully, EU-based system that would be accountable to the European Parliament and would put the commission at the centre of activity,” he told members of the parliament.

Finance ministers having a veto on decisions concerning one another’s economies should be ended too, economics commissioner Olli Rehn suggested. “If the IMF can take decisions with an 80% majority vote, why on Earth should the eurozone decide with unanimity?” he asked.

MEPs questioning Mr Asmussen and Mr Rehn told them the mess created by the Cypriot bailout conditions showed a need to radically rethink eurozone finance ministers’ and the troika’s working methods.

Voting right

*Ireland has been told to allow citizens living in another EU country to vote in elections.

Only gardaí and army personnel working abroad get the chance to vote in general elections. And Irish living abroad lose their vote unless they express a wish to return to Ireland within 18 months.

Ireland is one of six EU countries that disenfranchise their citizens.

“It is very important that the countries take action to change this law that was developed before the concept of people moving around freely became a reality,” justice commissioner Viviane Reding said.

More in this section