Signs of growth and stability in Irish economy – Chopra
Published 14/07/2011 | 12:59
The EU/IMF/ECB "troika" heaped praise on the Government’s attempts to rein in our finances but acknowledged that the hard work here is being overshadowed by a bigger European crisis.
The fiscal programme was on track and meeting bailout targets, the Government was told.
Ajai Chopra, the head of the IMF delegation, pointed to positives in the Irish economy despite what is going on abroad.
“There are signs of growth and stability in the economy after five years of wrenching cuts,” he said adding that the government has the political will and determination to implement the reform programme.
However, he also said that one of the biggest tests of this programme will be whether unemployment figures can be reduced over time and that while exports and competitiveness are driving growth, the domestic economy is on hold.
Commenting on the recent downgrade of our debt to junk status by ratings agency Moody’s, he said the move was related to fears of a bigger problem in Europe and Ireland should be viewed on its own merits.
Greece needs a second bailout and there are growing fears of a debt contagion with major economic problems in countries like Italy, Portugal and Spain.
"We need to keep in mind that the Moody's downgrade was directly linked to the eurozone area policy stance," he said.
"Rating agencies have got it wrong on the upside... It's naturally possible they are getting it wrong on the downside by overestimating risks."
He added that had it not been for the dowgrade, Irish bond spreads would be narrower meaning that the markets would view Ireland as less risky.
"If it wasn't for contagion risks we would be seeing significantly lower spreads in the case of Ireland.
Mr Chopra said that the troika is looking forward to the next review in October which will focus on the government’s plans to overhaul the medical, legal and pharmaceutical sectors.
He was speaking at a press conference at the European Commission’s office on Dublin’s Dawson Street after the latest quarterly review of the Government’s progress in fixing the economy including restructuring and deleveraging of the banks.
They are also assessing whether cuts in the public finances are sufficient to reduce our debts in line with targets and at other initiatives like the jobs programme.
Istvan Sekely of the European Commission and Klaus Masuch of the European Central Bank also attended the conference outside which anti-bailout protesters gathered including members of Sinn Fein and People before Profit.
But none of the troika seemed bothered by the chants of “when they say Chopra, we say fight back.”
None of the troika members would be drawn on the issue of defaults by European countries but Mr Chopra called on Europe to have a more joined-up approach to its problems.
The Government year end budget deficit target is 10pc of gross domestic product (GDP), or output, while the 2014 aim is 3pc although many economists believe the latter will be pushed into the future.
Mr Chopra added that the likelihood is that the deficit is likely to be slightly higher than the 10pc at year end.
The latest exchequer figures already show the Government is broadly in line to meet year end budget deficit targets, despite economic pressures at home and in Europe.
The figures for the first six months of the year show that with corporation tax and VAT weaker than expected in the first six months of the year, taxes were slightly lower with a shortfall of 0.7pc or €115m but this is against a total target of almost €15.5bn.
But overall economists believe the targets will be broadly met or just slightly off target with a current budget deficit of €10.8bn, and excluding bank related payments, up by over €1bn.
Earlier Finance Minister Michael Noonan and Minister for Reform Brendan Howlin held a news conference highlighting what the Government has achieved since the bailout loans last year.
“I am pleased that the mission has concluded that Ireland is meeting all of the conditions and targets of our programme and we have met the fiscal targets,” Minister Noonan said.
“We have met the banking targets. We have met the structural reform targets. I am also pleased that the external partners have concluded that the Irish Programme is on track and we are making good progress.”