Wednesday 23 August 2017

Public servants face pay and job cuts as the IMF moves in

Deputy director of the IMF's European department, Ajai Chopra (left), walks past a beggar in Dublin yesterday. Photo: PA
Ajai Chopra and colleagues passing the headquarters of Anglo Irish Bank on St Stephen's Green. Photo: PA
Ajai Chopra is surrounded by journalists as he arrives at the Central Bank in Dublin. Photo: PA

Brendan Keenan, Anne Marie Walsh and Fionnan Sheahan

AN emergency team of up to a dozen IMF officials arrives in Dublin today to finalise details for a €100bn deal to bail out the banks and the country.

As a result, thousands of public sector workers are at risk of pay cuts and job losses in the aftermath of drastic measures likely to be imposed.

All workers face higher taxes, as the EU and the IMF will oversee at least €15bn in Budget cutbacks over the next four years.

At the same time, the International Monetary Fund will sanction emergency cash for the banks in a massive effort to restore confidence in the sector.

Thousands of public sector workers -- including teachers, gardai and nurses -- face wage cuts and possible redundancies as part of the new €100bn bailout package.

Massive cutbacks in the public sector wage bill -- which accounts for more than a third of all State spending -- are now seen as inevitable if the Government is to achieve savings targets outlined by IMF and ECB officials.

A draconian €6bn Budget is already on the cards, with tax hikes and savage spending and welfare cuts.

But these will not be enough to meet the harsh measures demanded by the IMF and ECB.

Earlier yesterday Central Bank governor Patrick Honohan spelt out the details in a frank interview when he said an IMF loan worth tens of billions was inevitable.

But he said he believed influential IMF/EU experts would not demand any radical alteration of the Government's savings plans after they inspected Exchequer and bank books.

"It's not my call. It's the Government at the end. It's my expectation that that is what is likely to happen," he said on RTE Radio.

But Taoiseach Brian Cowen continued with the Government's denials that a bailout was imminent. He said no decision had been made on EU funding for the banking sector.

He appeared to distance himself from Mr Honohan.

"I am prepared to sit down and discuss with everybody concerned what the best option for us and the euro area is, and when we have those discussions when all of those implications have been worked out. . . it is then, with respect, that the Government will determine what is in the best interest of the country at this time," he said.

World markets surged on news of the imminent bailout, as Ajai Chopra, deputy director of the agency's European department, led the IMF Dublin mission and held meetings in the Central Bank.

Finance Minister Brian Lenihan said it would be a "very desirable outcome" if substantial funds were provided by the IMF. But he insisted that changes to corporation tax were non-negotiable.

"Corporation tax is an absolute red line," he said. "I have always made it clear, including to some of those involved in the present talks -- and many of them agreed with me -- that we need a strong recovery and we won't get it without strong exports."

Mr Lenihan denied the visiting delegations will now direct budgetary policy. "They advise but they don't direct," he said.

IMF spokeswoman Caroline Atkinson insisted a bailout would not ignore the potential impact of savage cuts on the least well-off.

"Over the last couple of years we have been very focused on the need for what we have been calling social conditioning --the need to protect the very poorest and the most vulnerable," she said.

Medicine

"We get called in because the patient is sick," she continued.

"We have some medicine, which is the liquidity and the funds that we can provide, but we also have to suggest some other measures that may sometimes be difficult for countries to implement."

Earlier, Mr Cowen defended the Government from accusations of a loss of sovereignty.

But the tensions within the coalition continued with ministers and backbenchers alike upset at the continued denial of any bailout being in the pipeline.

The Government is now anxious to publish the four-year plan early next week to show it was not dictated by the IMF and EU. The package of cuts and taxes over the next four years could be as high as €17bn if the latest forecasts from the OECD think-tank are correct.

It predicts average annual growth of just over 2pc over the next two years, compared with government forecasts of 2.5pc.

An Irish Independent investigation today reveals that major public sector reforms contained in the embattled Croke Park deal have yet to be agreed upon, let alone achieved.

Eight months since the agreement was brokered, there is little evidence the Government is making any progress on its promised "transformation" of our state sector.

Sources have predicted the scrapping of the agreement will be high on the agenda of the 'hit team' as it examines ways to slash the Government's crippling deficit.

The IMF experts will do yet another trawl through the banks. The idea is that they will give them a clean bill of health and back it up with a multi-billion fund for bank use.

The hope is that this money will not actually be needed because the banks will again be able to raise funds on the market, instead of relying on the European Central Bank.

The rest of the bailout fund is likely to cover planned government borrowing for at least a couple of years.

Irish Independent

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