IMF attacks Coalition failure to protect poor
Published 20/12/2012 | 05:00
The IMF is unhappy with Finance Minister Michael Noonan's failure to protect the poor from some cuts in this month's Budget, the Washington-based organisation has said.
While welcoming means testing for medical cards and student grants, the International Monetary Fund said there should have been some measures to protect low income groups.
The criticisms were contained in a lengthy report published yesterday that was broadly supportive of the Government's policies and actions.
The report praises cuts to universal benefits such as childcare and pensions as well as means testing for student grants and medical cards along with higher fees for those attending university. It says such measures help to target welfare where it is needed but criticises the lack of extra benefits for those on low incomes.
The IMF report also highlights a report by the Dublin-based Economic and Social Research Institute which concluded that this month's Budget hurts the poor more than the wealthy.
Turning to the broader economy, the IMF said some sort of deal on the so-called promissory notes used to rescue former Anglo Irish Bank would be an "essential part" of a "smooth exit" from the bailout programme.
That contradicts what Mr Noonan said last month when he claimed that Ireland would be able to return to the markets even if the Government failed to reach a deal.
"We would certainly hope and encourage a promissory note deal before March," IMF official Craig Beaumont said yesterday.
Mr Beaumont added that the European Stability Mechanism taking stakes in Irish banks could play a "valuable role" in reducing the nation's debt burden.
The IMF turned up the heat on Europe to deliver on the June pledge to ease the burden of Ireland's bank debt, saying failure to do so could revive market doubts about the country's debt sustainability.
The IMF has been campaigning for a deal for some time, but hardened its language markedly in yesterday's report.
"Continued strong policy implementation is essential, yet a timely exit from official support cannot be assured without forceful delivery of European pledges," the IMF said.
"Inadequate or delayed delivery on these commitments poses a significant risk."
The new report says banks may have to shed more staff than originally planned because Irish banks still had much higher costs than many rivals.
The current reduction in average staff count per bank branch to 29 from 35 following redundancies and branch closures may still be insufficient to reduce operating costs as much as needed, it added.
The report also takes aim at Health Minister James Reilly's department, saying his colleagues must monitor health spending carefully.
It is still far from clear whether savings promised in this month's Budget will materialise, the report says. It singles out measures such as charging private patients for using beds in state hospitals.
The IMF also warns that the Government has not yet finalised plans to shave €400m off the public sector pay bill this year and €1bn next year.
While staying neutral on the question of the Croke Park Agreement, the report once again highlights how well paid Irish public sector workers are compared to their private sector equivalents or their counterparts overseas.
Low-skilled public sector workers, teachers and medicinal staff are particularly well paid, the report adds. Public sector workers get 14pc more than private sector workers doing the same work, it says.
That premium rises to 20pc for low-paid workers and excludes pensions and other benefits such as job security.
The Fund also downgraded forecasts for economic growth next year, saying it now expected gross domestic product to expand 1.1pc in 2013 and 2.2pc in 2014. It was the fifth IMF report in a row to slash forecasts.
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