Noonan: Ireland out of bailout in 2 years versus 10 for Greece
Published 27/10/2011 | 07:20
FINANCE Minister Michael Noonan said today that Ireland should be out of the €67.5bn EU/IMF/ECB bailout programme by the end of 2013 while Greece will be stuck in the mire for a decade.
His comments came after a pre-dawn agreement to slash Greece's massive debts by 50pc and boost the eurozone bailout fund to €1 trillion.
Earlier Sinn Fein leader Gerry Adams suggested that Taoiseach Enda Kenny has serious questions to answer about the deal struck in Brussels.
He added that while Greek banks are being forced to share the burden, Irish banks are being propped up by the taxpayer.
Mr Noonan said: "Could you imagine the situation in Ireland if we went to the electorate and said you have another 16 years of this and you have declining growth rates and severe austerity measures.
"To say that Greece has done very well, that is like saying if the man down the road has gone bust and you say 'that's great I'll go bust as well, so that I won't have to pay my bills', that's a wrong take," he said in an interview with RTE radio.
He added that Ireland is in a position to grow the economy through exports but he also hinted there may be some leeway on banking debt related to the now nationalised Anglo Irish Bank in the future.
Earlier Tanaiste Eamon Gilmore defended the Government’s position that Ireland will not seek to default on any of its eurozone debts.
Mr Gilmore said: "We don't want to be in a situation that we are in recession for the next 10 or 15 years.
"If we go down the Greek route, that is the consequence of that.
“What we want to do is get out of recession, get economic growth back into our country, get back into the markets, pay our way and recover our economic sovereignty."
Investors reacted positively today to the over-night Brussels deal when European leaders delivered a long-awaited action plan to tackle the eurozone debt crisis.
European stocks shot up after investors waded into riskier assets.
Oil prices rose above $92 a barrel while the euro gained strongly following the European summit dedicated to fixing the Greek debt problem before it provokes a bigger debt crisis across the continent.
European trading was buoyant from the outset.
Britain's FTSE climbed 2.1pc to 5,670.12. Germany's DAX jumped 3.7pc to 6,243 and France's CAC-40 gained 3.9pc to 3,297.
Wall Street's Dow Jones Industrial Average rose by 2pc on news of the deal and after official figures showed the US economy grew by an annual rate of 2.5pc between July and September, nearly double the previous three months.
The Greek market rallied amid hopes the deal would finally lift the spectre of government bankruptcy.
Shortly after opening, shares on the Athens Stock Exchange were up 3.46pc at 800.55, with banking stocks up more than 10pc - after suffering heavy losses earlier this week.
Carsten Brzeski, analyst at ING Bank, said the three-pronged solution was "supposed to form a Euro-style bazooka".
He added: "Even if it probably was not the final word on the crisis, it is again another important step in the right direction."
EU leaders "stopped the haemorrhaging,” said Marc Touati, chief economist at Assya Compagnie Financiere in Paris. "We have saved the Eurozone and that's the good news and that's why the markets are reacting positively."
Eurozone leaders sealed a three-part deal in response to the growing economic crisis after 3am today.
As a result, the €440bn European Financial Stability Facility will be used to insure part of the losses on the debt of vulnerable countries such as Italy and Spain, rendering its firepower equivalent to the €1 trillion.
It means that, coupled with an earlier decision to recapitalise vulnerable banks, the summit has delivered on the package it promised although how it is hammered out remains to be seen.
Taoiseach Enda Kenny this morning welcomed the deal, saying it would create a more stable eurozone which will be hugely beneficial to Ireland.
"This deal has been achieved without any damage to Irish interests and it has also recognised the progress Ireland has made.
"It allows a much improved environment within the eurozone with stability for the euro and therefore an improved environment for Ireland to do its business,” he said.
"It allows us now to focus on the increased opportunities for jobs and jobs creation, business initiatives and getting people back to work.”
Asked what guarantees he was able to secure that the cut in Greek bondholders would not have a negative impact on Ireland, Mr Kenny said: "The communiqué points out clearly that this was a unique situation for Greece and the continued funding for Ireland is well recognised and specifically presented by the leaders in their findings."
After the summit, EU president Herman Van Rompuy said the deal would reduce Greece's debt to 120pc of its GDP in 2020.
He added that the eurozone and International Monetary Fund would give the country another €100bn.
French president Nicolas Sarkozy said the agreement would "give a credible and ambitious and overall response to the Greek crisis".
The text of summit conclusions refers to the bailout fund being leveraged "several fold" - leaving plenty of scope for jittery markets to question the value of its increased firepower in tackling existing and future economic problems in the single currency area.
Having named yesterday as the deadline for final decisions on a rescue package - complete with detailed figures - the 17 leaders went into extra time for four hours to deliver results.
"The leaders were determined that there should be at least one firm figure in the outcome" said one insider. "That is the 50pc write-down on Greek debt to ease the Greek burden."
Reluctant banks had offered 40pc, but German chancellor Angela Merkel and Mr Sarkozy insisted that the sector had got off relatively lightly in the crisis so far, with taxpayers bearing the brunt of bailouts.
Now, they said, banks should be prepared to forgo a significant level of Greek repayments to help ease the crisis.
The 10 hours of talks began with a meeting of all 27 leaders, including British Prime Minister David Cameron. After 90 meetings they had endorsed the first part of the deal - boosting the liquidity of the most exposed banks in Europe.
The recapitalisation scheme does not involve UK banks, but forces many European banks to increase their reserves by more than €100bn.
The money may have to come from national coffers - effectively taxpayers - if the banks cannot raise the obligatory extra money through private investors by a deadline of next July.
Mr Cameron left that part of the talks saying "some good progress" had been made.
Then the 17 eurozone leaders settled in for tougher negotiations, finally convincing the banks to take a 50pc "hit" on their Greek loans repayments.
The third element, increasing the value of the bailout fund, proved toughest, and the result is most open to attack from critics, who may also point out that a Greek debt write-off of 60pc was considered by many to be the minimum necessary.
After the summit, European Commission president Jose Manuel Barroso said the EU had delivered "a comprehensive response to the sovereign debt crisis".
He said the summit deal restored confidence in the banking sector, with final conclusions making clear that "banks should be subject to constraints regarding the distribution of dividends and bonus payments".
Mr Barroso insisted: "Increased responsibility and a fair contribution of the financial sector is central to our approach.
"These are exceptional measures for exceptional times.
"Europe must never again find itself in this situation. That is why we must further improve our economic governance, namely in the euro area: the euro summit paves the way to a further strengthening of co-ordination and surveillance (of eurozone economies).
"The package we have agreed is a comprehensive package that confirms that Europe will do what it takes to safeguard financial stability. "
He said resolving the crisis was "a marathon, not a sprint" and technical work to finalise parts of the package would be completed in the next few weeks.
The commission would also be making more proposals "for a community way out of this crisis."
He said that at the G20 summit of world leaders next week in Cannes, Europe would show its partners what it could do: "an agreement to conclude measures to restore confidence in the European banking sector; ensuring the adequate firewalls; accelerating our ambitious agenda for growth; and further strengthening economic surveillance and co-ordination".
It amounted to a readiness "to complete our monetary union with a true economic union," Mr Barroso added.
The euro strengthened today in another sign of investor confidence, rising against most major currencies including the pound and US dollar.
European banks will have to increase cash buffers designed to protect against future crises - known as Tier1 capital ratios - to 9pc until next June.
Banks will be expected to try at first to use private sources of capital to raise the €108 billion needed to beef up these protective cushions but the state will step in if this is not possible.
EU leaders said they would finalise Greece's second bailout package by the end of the year, which will include a higher private sector involvement.
The private sector - predominantly financial institutions such as banks - has been asked to write off 50pc of its Greek debt.
The eurozone will contribute an additional €100bn bailout to this write-down in a move to lower Greek debt to 120pc of GDP by 2020.