Government defied the Troika with pension raid
Considerable doubts raised about merits of 'smash and grab' tactics
Published 23/10/2011 | 05:00
THE Government defied the Troika's express wishes not to continue with its €2bn "smash and grab" raid of private-sector pensions, the Sunday Independent has learned.
It has emerged the Troika -- the European Commission, the European Central Bank and the International Monetary Fund -- expressed serious concerns to the Government during discussions earlier this year, but they were flatly ignored.
The pension raid by Finance Minister Michael Noonan was strongly opposed by unions, employers and the pensions' industry when it was announced in May, and it is clear the Troika had considerable doubts about the merit of the move.
Despite grave disagreements between them on many issues, including the burning of bondholders, the Troika were unanimous in their opposition of hitting private-sector pension funds for over €460m a year to fund the Government's jobs initiative.
The extraordinary revelation came last week during discussions between Troika chiefs Ajai Chopra (IMF), Istvan Szekely (EC) and Klaus Masuch (ECB), and a Fianna Fail delegation last Wednesday.
During a wide-ranging discussion, the level of opposition from our international masters was made known.
"What we got from the meeting was a very clear impression the Troika were not happy or supportive of the Government's raiding of the private pension fund.
"They gave us very clear signals they didn't agree with it, and had grave concerns about it," the party's finance spokesman Michael McGrath told the Sunday Independent yesterday.
Mr McGrath said they certainly spoke as one on the pensions issue.
Mr McGrath also said the Troika were at pains to stress how much flexibility the Government had under the terms of the programme.
"We often hear the Government has no flexibility when it comes to cuts. This, we were told by the Troika, is certainly not the case. The Troika have said the amount of influence they have is often overstated."
During the discussions with the Fianna Fail team, Mr Szekely said that while their concerns were relayed to the Government, it is an illustration of how much flexibility it has, that they chose to ignore such concerns. He added that it "is all water under the bridge now".
A spokesman for the Department of Finance has confirmed that there were certain concerns raised by the Troika back when the matter was being finalised, but that no such issues remain and the latest review was passed "with flying colours".
"They had initial queries about whether it could deliver on what was promised, but certainly no issues remain at all on that front. The Government has gotten through the latest review with no problems," the spokesman said.
Mr McGrath accused the Government earlier this month of using the controversial pensions levy for purposes other than the jobs initiative itself.
Mr McGrath said it was clear from exchequer returns the money was not being spent on the initiatives as promised by the Government. Instead, almost half of the cash accrued by the Government by the levy was being used to "make the exchequer figures 'appear' €200m better", McGrath said.
McGrath said a parliamentary question to Mr Noonan had revealed the Government had made €461m through its levy on private pensions, all of which was collected last month.
The Government had pledged to spend this on a variety of measures, including the VAT reduction, cuts to PRSI, school capital works, and road building. "By the Government's own figures, the total cost in 2011 of the measures in the jobs initiative is €379m," McGrath said.
By his tallies, McGrath said the cost to the Exchequer of the jobs initiative would have been around €255m -- but the pensions levy had taken in €461m, meaning some €206m was being stockpiled in Government coffers.