Ireland ‘out of intensive care and well on the road to recovery’

The Government will seek to “finish the job” and get the budget deficit below 5% of GDP next year, sending “a clear signal” that the country is on the road to recovery.

Brian Hayes, minister of state at the Department of Finance, said Ireland was in a situation where 85% of the work on correcting our financial problems was done, but any faltering would be a “dereliction of duty” — and open the way to a possible second bailout.

And he said unpopular measures such as the property tax and impending water charges were part of the deal.

At last night’s session at the MacGill Summer School entitled ‘Managing the Economy and Public Finances after the Troika’, Mr Hayes said Ireland was “out of intensive care and well on the road to recovery”.

Earlier, in contrast to fellow minister Ruairi Quinn, who said the troika were being “intrusive” in trying to ensure a €3.1bn adjustment in the coming budget, Mr Hayes said: “I do not see the troika as the bogey man,” claiming they were the lender of last resort at a time when Ireland had very few options. He said the deficit needed to be cut by 5.1% by the end of next year and “I would hope that we could achieve more than that.”

He told the summer school that the Government wanted to ensure long-term sustainable growth and said: “The property tax and water charges are part of the process of building resilience into our tax system.

“To falter now, when success is in sight, would be a serious dereliction of duty. We should push on and finish the job — ahead of schedule if possible.

“Getting the budget deficit below 5% of GDP in 2014 would send out a clear signal.

“We are still spending 22% more than we are taking in. We are still borrowing €1bn a month just to keep the show on the road.”

Peter Breuer, the resident representative to Ireland of the IMF, said he expected modest domestic demand growth in the next year, dependent on factors including a broader external recovery and improving the banks’ lending capacity.

He said Ireland cannot rely only on export-led growth and sustained recovery will require a job-creating revival of domestic demand, while the critical factors are for banks to work out their very high non-performing loans and improve profitability.

While he praised the cumulative budget measures of almost 15% of GDP over the past five years, he said Ireland needed to continue with the “high wire act” of preserving confidence that it will reduce its debt burden over time to ensure durable market access.

Fianna Fáil Finance spokesman Michael McGrath said a proposal by former IMF mission chief Ashoka Mody that Ireland should abandon austerity was “simply not credible” as such a move could trigger a second bailout.