Crunch for Noonan as he meets IMF chief
Surprise visit from Chopra as bailout talks intensify
Published 16/03/2011 | 05:00
Finance Minister Michael Noonan today faces a crunch meeting with IMF boss Ajai Chopra to convince him the Government's new plans will improve our chances of economic recovery.
Mr Chopra's surprise arrival six days into the life of the Coalition is a key development of the Government's efforts to renegotiate the bailout.
Mr Noonan will have to explain the delay in recapitalising the banks and why he wants to restore the old minimum wage. These are key terms of the bailout.
The previous Government was due to have pumped a €10bn instalment of aid into the banks last month.
But now the new Coalition has decided to wait for a full report on the state of the banks at the end of the month before committing any more funds.
In a separate heavy-hitting meeting, Mr Noonan will also discuss our banking problems with ECB chief Jurgen Stark.
The meetings come after Mr Noonan said last night he was "confident" the Government could get a reduction in the cost of the bailout.
But the pressure is intensifying on several fronts within the EU to give in on demands for changes to the corporation tax system. New proposals on a common corporate tax base are due today when the European Commission publishes its long-awaited document.
The Government has agreed to "engage" on them but it is likely to be many years before changes are introduced -- if ever.
Taoiseach Enda Kenny yesterday stood firm on a refusal to countenance any change to the corporation tax system. And Mr Noonan threw down the gauntlet to France on corporate tax yesterday, telling European politicians that Ireland's effective tax rate of about 11pc is far higher than France's 8.5pc.
Mr Noonan and Public Expenditure Minister Brendan Howlin will hold a "get to know you" meeting with Mr Chopra in the Department of Finance today.
Mr Noonan will deal with budgetary and economic policy, while Mr Howlin will focus on how spending cuts will be handled.
The IMF wants to discuss what the organisation calls "slippage" in meeting targets set down in December when the bailout was agreed. For example, Ireland was supposed to have ordered the recapitalisation of AIB, Bank of Ireland and EBS.
The programme agreed in December also committed the government to cutting the minimum wage, but the new Government is now promising to reverse that decision.
An IMF spokesperson told the Irish Independent: "The visit will be an opportunity to learn from the new Government about its economic plans. The full review mission will take place a few weeks later".
The spokesperson said Mr Chopra was in Dublin after receiving an invitation from the new Government. The IMF made public two weeks ago that Ireland had missed certain targets or "milestones".
The key test facing the new Government is to have the banks fully stress-tested by the end of this month.
Mr Noonan said that the Government would be sticking to the budgetary targets for the coming two years, as agreed with the EU and IMF, but would review its plans after that.
He said the Government would be presenting revised forecasts to European Commission next month.
The Government's commitment to producing balanced budgets beyond 2015 and strengthening the budgetary process will doubtless be welcomed. But Mr Noonan reiterated that the €10bn earmarked for the banks would probably not be enough and the shortfall would only be revealed by stress tests.
The Finance Minister insisted the new Government would not be making a decision on the recapitalisation until the stress tests were completed.
Mr Noonan has just returned from his first meeting of EU finance ministers in Brussels, where he hit back at French attacks on Ireland's corporation tax. His comments marks the first time that the Government has publicly stated that Ireland's effective corporate tax rate is not the lowest in Europe.
French Finance Minister Christine Lagarde commented that Ireland's interest rate on the bailout wouldn't go down unless the country made a "gesture" by upping the corporate tax rate.