Cowen: Govt talks with IMF/EU 'constructive'

The Government is engaged in constructive talks with the International Monetary Fund and Europe to secure the best outcome for the country, Taoiseach Brian Cowen said today.

Formal negotiations and inspections of the State’s debt-ridden finances are under way in Dublin on a possible bail-out loan worth tens of billions.

“Talks that began are going well in terms of being open and constructive,” Mr Cowen said.

Dismissing calls for his resignation over the need for IMF help, the Taoiseach added: “You would expect me as leader of the Government to conduct these discussions in a way for which the best outcome for Ireland can be achieved.”

The Government is coming under mounting pressure over its controversially low 12.5% corporation tax rate. Britain, France and Germany are among the EU nations which believe it is unfair and Finance Minister Brian Lenihan said the issue was an absolute “red line” while three other senior cabinet ministers insisted the issue was “non-negotiable”.

Mr Cowen, who it is understood is not due to hold face to face talks with the 12-strong IMF mission today, said he was being kept fully briefed at all times.

“The Government has a job to do here. We have a four-year plan that we are finalising which we are required to do,” he said.

“We have a Budget to bring forward on December 7.

“We believe we have a majority for that Budget and we have a job to do in relation to ensuring that the present issues affecting the Euro, and as it is affecting Ireland, are resolved.

“We are involved in constructive talks on that. That’s the job that the Government has to do and that’s what we will do.”

The IMF-European delegation also includes about 20 officials from the European Commission and the European Central Bank.

Mr Cowen, who officially opened Dublin Airport's new Terminal Two, has faced 24 hours of resignation demands from the three opposition parties - Fine Gael, Labour and Sinn Féin.

The Taoiseach rejected the calls and he went on to say that European allies have given their support for Government economic policies.

“The situation and the demanding conditions are such that these decisions whilst necessary are not sufficient in the present circumstances,” Mr Cowen said.

“Now we are working to see what support programme can be devised which would be helpful to Ireland and will protect our interests.”

It is understood the Government’s four-year plan to reduce spending by €15bn will be published early next week.

It is the first time Mr Cowen has conceded that the IMF/EU mission is here to examine the prospect of a bailout loan.

“I think it’s very important to recognise the situation as it is – the Government is engaged in discussions with colleagues and European Union institutions about seeing, were Ireland to apply, what would be the shape of the package,” he said.

“We want to make sure that’s the best possible one for Ireland.”

Mr Cowen also said: “I’d say to people whilst of course it’s a difficult time, it’s a time that we will come through.

“It’s a a time where we will continue to prosper. It’s a time where the Irish Government will put its proposals to the people in terms of the parliament, in terms of the Budget, in terms of the four-year plan and in terms of whatever arises out of these discussions that presently take place.”

IMF officials, including banking experts and auditors, headed by Ajai Chopra, joined representatives from the European Central Bank and European Commission in poring over the State's books.

The audit began the day after Ireland’s Central Bank Governor Patrick Honohan exposed the feared extent of a potential bailout – tens of billions.

Talks will focus on the planned €6bn Budget savings due on December 7, the four-year €15bn savings plan and the financial black hole crippling the banks.

The IMF was keen yesterday to stress that it had a social agenda amid fears the poorest in society would bear the brunt of any cuts it sanctions.

Mr Cowen stressed that there was no shame in allowing the IMF in and warned that the country had not surrendered its sovereignty.

Former Taoiseach John Bruton described the arrival of IMF officials as a “very, very sad day for Ireland”.

One avenue being explored is so-called substantial contingency capital, or “CoCo”, as it has become known in the banking world.

Money would be borrowed from the IMF and the EU, with other bilateral funds paid into a pot, in effect creating a massive cash buffer for the banks in the event of another black hole.

The loans would be guaranteed by an elaborate share scheme triggered if the banks’ finances hit a red alert mark.