independent

Sunday 20 April 2014

Burton at odds with cabinet over new bailout

Witholding increments from the public sector has 'considerable merit'

Joan Burton. Photo: Mark Condren

IRELAND will have to avail of a second bailout unless the European debt crisis is resolved quickly, according to Social Protection Minister Joan Burton.

Her comments appeared to put her at odds with the unconditional statements by the Taoiseach Enda Kenny and Finance Minister Michael Noonan, who dismissed talk of a second bailout as "ludicrous".

In a hard-hitting interview with the Sunday Independent, Ms Burton refused to rule out the likelihood of a second bailout.

She also controversially said there was "considerable merit" in the non-paying of incremental wage increases to public sector workers.

On the second bailout, she said it was impossible to foresee what would happen next week, let alone in 18 months' time. "I can't predict the future. If you are asking me to crystal-ball gaze to the end of next week, I can't," she said.

Her comments follow those made by the respected CitiGroup economist Willem Buiter, who last week said Ireland should start preparing for a second bailout months in advance and not "in a state of near panic at the last minute".

Ms Burton said Ireland's future was far from assured as long as the sovereign crisis was ongoing. The minister said the deepening crisis in Europe had "significantly added" to the difficulty faced by Ireland in emerging from the EU/ECB/ IMF programme in 2013.

"If the eurozone crisis hadn't emerged a couple of months ago, I would have been able to give a much tighter prediction. . . but can I predict if and when [a resolution] will happen? No, I can't," she said.

Asked if Ireland's ability to leave the clutches of the troika is contingent on a speedy resolution in Europe, Ms Burton said: "Yes, the two are tied together. The sooner a resolution is found the better."

However, Ms Burton said that if Europe did manage to find a definitive solution to the crisis, then Ireland could regain its sovereignty.

"If the eurozone comes together then we can work to the other side of the crisis and that would be of great benefit to Ireland, who could then leave the programme in an orderly fashion," she said.

Writing in today's Sunday Independent, economist Colm McCarthy said that Buiter's

prognosis that Ireland could need a second bailout was plausible on Monday and even more so after Friday's downgrading of France by Standard & Poor's.

Ms Burton was deeply critical of the rating agencies and those in the markets who have played havoc in many countries, including Ireland.

"You have people with very large volumes in hedge funds. They only have to take a couple of billion and play various markets. But that plays havoc with the ratings of various countries," she said.

"Market players are by and large 28-year-olds from Harvard or Yale who are given €2bn to play with," she added.

Ms Burton has also said there was "considerable merit" in not paying incremental length-of-service pay increases to public sector workers.

"I thought there was a lot of merit in proposals put forward by people like Fergus Finlay. Increments were not on the table for the Budget. We need to think about that. But if the financial position remains as difficult as it is, we must examine all areas. There can't be any area closed to discussion," she said.

In a further break with stated government policy, Ms Burton courageously said that self-employed people should for the first time receive welfare benefits on a par with PAYE employees.

"It is a very important issue. I am hoping by the end of March we will have a working report on the social insurance fund. We have to look at how their contributions can be re-jigged to ensure that in future they're making contributions that covers some period of unemployment," she said. "I think what we have to do is make provision for the PRSI system to provide for a contribution to be paid [for the self-employed] as with somebody in employment.

Sunday Independent

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