ECB chief: no relaxing of debt targets, even if deeper cuts needed
ECB PRESIDENT Jean-Claude Trichet said yesterday there was no case for easing up on Ireland's debt targets -- even if sluggish economic growth means we'll have to cut more from this year's budget than the €3.8bn originally expected.
The comments came as Mr Trichet gave a resounding endorsement to Ireland's progress so far, claiming the country is "gaining credibility regularly" and improving its creditworthiness "very visibly".
One of the key targets in Ireland's bailout programme is to bring the country's budget deficit level down to at least 8.6pc of gross domestic product (or national output) in 2012.
Earlier this week, the IMF signalled a lower than expected GDP next year as it cut its growth forecasts from 1.9pc to 1.5pc. The ECB has not yet published new Irish figures, but has a similar view.
Finance Minister Michael Noonan also recently indicated that the Government is likely to reduce its GDP estimates for next year as the international downturn casts a shadow over Irish exports.
Lower economic growth will mean Ireland has to cut more from the budget than the €3.8bn initially expected if the country still has to bring its deficit to 8.6pc of next year's lower GDP figure.
Asked whether there was any case for easing up Ireland's debt to GPD target in light of the current situation, Mr Trichet said it was of "extreme importance" that Ireland stay the course with the original programme.
"When I look at Ireland I see a country that is gaining credibility regularly," he said. "[It] is increasing its creditworthiness very visibly [by following the programme]. Of course we can do nothing but encourage Ireland in this path."
The ECB boss also stressed that even if tough austerity measures produced "negative" effects for bailout countries in the short term, the result would ultimately be "excellent" for growth because it would inspire confidence.
"When you are in a situation where you are losing confidence because you did not behave competently in the past, it is elementary that you have to correct," he said.