IIF criticises ‘one size fits all’ austerity policy

Ireland will successfully exit the bailout programme later this year thanks to its flexible workforce in the private sector and the US export market, the international bankers’ body, the Institute of International Finance claimed.

But they were critical of the “one size fits all” approach to the EU’s austerity programmes, while the austerity policies of Germany and other budget hawks took a beating from trade unions as EU leaders battled to restore growth.

Taoiseach Enda Kenny and the presidents of the European Commission and the European Council were warned that they were pursuing suicidal policies by the president of the European Trade Union Congress (ETUC), Ignacio Toxo.

The Institute of International Finance (IIF) showed that just because the troika recipe appeared to be succeeding in Ireland, it could not be applied to all countries.

They called for more time and more money for Greece, and in a detailed research note showed that the reason Ireland is back in favour with the bond markets is because of the load carried by private sector workers and its US exports and investors.

A very angry ETUC president at the social summit preceding the leaders’ meeting in Brussels, warned them that they were “living in a parallel universe” and said there were no green shoots of growth as they claim.

He urged them to recognise the social reality, the institutional crisis their economies are in, and said the Italian election results demonstrate they have a huge problem. He acknowledged the growth and jobs compact leaders agreed in June but asked where were the measures to create the jobs.

However, after the first session of the EU leaders’ summit the man who chaired the meeting, Herman Van Rompuy, said there must be no deviation from the attempts to bring public finances back into line.

According to the IIF, a more tempered fiscal consolidation has helped Ireland succeed in re-starting the growth needed to underpin debt sustainability and renew bond issuance. As a result, Ireland’s creditors will be repaid in full and on time.

The far harsher fiscal adjustment required of Greece has had a much more negative effect on GDP. Applying the Irish example in Greece to help restart growth would require additional funding. The final cost, however, would be much less than might eventually be needed if output continues to fall and doubts about debt sustainability remain.