Monday 16 January 2017

Honohan calls on Government to preserve Ireland's fiscal powers

Published 01/02/2012 | 05:00

Central Bank Governor says troika and this country may have different interests

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THE Governor of the Central Bank last night urged the Government to fight against the financial restrictions imposed by the EU/IMF/ECB, claiming that their interests were not always the same as Ireland's.

In comments that will raise eyebrows, Patrick Honohan said the Irish authorities should fight for "as much freedom of action" as they can get because the bailout partners each have their "own set of interests not always fully aligned" with those of Ireland.

He also said that "nobody could be happy" with the cost of the bank bailout or the "reluctance to envisage losses being imposed on bank creditors".

Mr Honohan was speaking at his first public appearance of the year, the launch of the English translation of Sean O Suilleabhain's 'Miraculous Plenty: Irish Religious Folktales and Legends'.

Parallels

The former Trinity professor said he found numerous parallels between folklore and the financial calamities that have befallen Ireland, not least the "mysterious strangers offering advice, which is received with a mixture of hope and scepticism".

His remarks were widely interpreted as referring to the so-called bailout troika, a theme to which Mr Honohan returned later as he pointed to the "counterparts" with whom Ireland is dealing, "many of them supportive, but each with their own set of interests not always fully aligned with Ireland's".

He continued: "In this environment, Irish public servants and elected representatives of the Irish people must proceed carefully with a view to maintaining as much freedom of action to take advantage of the opportunities that arise spontaneously. Time will tell whether we have done as well as possible in this sphere."

He stressed, however, that even though Ireland was dealing with "powerful external forces" the country retained "domestic choice" on key areas, such as choosing whether or not to cut numbers or pay in the public service.

"Of course, there is little or not choice as far as the overall level of government borrowing is concerned," he added.

"It is hardly fair to simply state that the troika is limiting this deficit; after all, without the financial support from the troika, the Government would not have been able to phase the deficit reduction as gradually as it is being done."

Mr Honohan did not refer specifically to ongoing negotiations about ways to reduce the €47bn cost of bailing out Anglo Irish Bank, but he said that the cost of financing bank debt had "so far been less than it might have been because of the way it has been financed".

"Continuing to optimise policy in this area is something that is receiving close attention," he added.

Mr Honohan also made what could have been taken as a veiled reference to the recent repayment of €1.25bn to Anglo bondholders, saying: "Nobody could be happy with the scale of public debt that has been accumulated as a result of bank failures and the reluctance to envisage losses being imposed on bank creditors."

He declined to answer questions from media either before or after the event, which he addressed partially in Irish.

Irish Independent

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