Coalition will not accept ‘onerous’ loan rules

The Government will not accept a safety-net precautionary credit line for exiting the troika bailout if the conditions imposed are too stringent and result in it appearing like another bailout.

A senior Government source said yesterday that “if it feels like a second bailout or smells like a second bailout, we won’t be going for it”.

With Finance Minister Michael Noonan in Washington today for talks with the IMF on Ireland’s Dec 15 exit from the bailout, a top economist has warned that while the country can exit without a financing backstop measure, there would be a lot more austerity on the way and Ireland would be likely to default in the future.

After today’s meeting with IMF managing director Christine Lagarde, Mr Noonan will report back to the Taoiseach on his recent meetings with EU and ECB chiefs.

A final decision isn’t expected until after meetings of eurozone finance ministers in late November and early December.

However, while the financial backstop known as a precautionary loan facility is required in case of an unforeseen crisis emerging, the source said there had been a shift in opinion in Government circles and if the conditions imposed were “too onerous”, Ireland would go it alone.

He said that in exiting the bailout, Ireland was demonstrating confidence to the markets.

He added that the fiscal treaty already imposed “pretty strict” conditions. More severe measures, he said, would send the wrong signals to the markets.

Financial analyst Cormac Lucey yesterday agreed that Ireland could return to raising funds on the private markets without an emergency credit line.

Pointing to the Government’s access to €25bn in reserves through the NTMA, he said this would provide Ireland with at least a year of liquidity before having to return to the markets.

“Even if the markets were to turn their backs on us on Dec 16, we have these contingency reserves,” Mr Lucey said.

He warned that while Ireland was within reach of reducing the deficit to 3% of national income in 2015, it must be remembered that the structural deficit has to come down to 0.5% over time and that will require “a fair bit of austerity”.

Politically, it is understood that the Government is anxious that the public notice a difference after Dec 15.

From that date, Ireland will be watched on a six-monthly basis by the EU. The last thing some politicians want to see is members of the troika trooping in and out of Ireland every three months, even though we wouldn’t be taking any funding off them.

European Affairs Minister Paschal Donohoe yesterday said the Government was very clearly evaluating how the country was to exit the bailout.

He said Ireland had made strong progress to date and had put in place a plan that was both sustainable and durable.