Rehn: Plan sound basis for talks
But economics chief steers clear of endorsing €15bn cuts target
Published 25/11/2010 | 05:00
EU economics chief Olli Rehn yesterday welcomed the Government's four-year plan -- but steered clear of endorsing the €15bn tax and cuts target.
He said the document was a "sound basis" for ongoing talks with the European Commission, ECB and IMF on the terms and conditions of a rescue package for Ireland.
"I welcome the continued commitment of the Irish authorities to reducing the deficit to below 3pc by 2014," Mr Rehn said in a statement. "The four-year fiscal plan is an important contribution to the stabilisation of Irish public finances."
Mr Rehn's failure to mention the €15bn figure is significant because, in private, some EU officials have expressed scepticism that it will be enough.
EU finance ministers insisted last Sunday, before approving Ireland's loan request, that an annual review clause be written into the plan in case economic growth turns out to be lower than is forecast.
However, Mr Rehn did sign off on the planned €6bn in spending reductions and revenue-raising measures for next year.
"A 2011 Budget involving a consolidation effort of €6bn would be appropriate, as it would strike a balance between allowing the nascent recovery to strengthen and addressing budgetary challenges in a timely fashion," he said.
He said: "The plan strikes a good balance of durable expenditure and revenue measures, with due regard to protecting the least well-off."
Ireland's international donors expect what they call "strict conditionality" as part of a loan package which has yet to be agreed, but is expected to amount to €85bn.
This means a separate "memorandum of understanding" laying out a stern austerity plan and unsparing bank restructuring. The EU is also pushing "structural reforms", including pension, public sector and labour market overhauls, to boost consumption and investment. "I welcome the structural reform commitments in the plan. These policies encourage exports and a recovery of domestic demand," Mr Rehn added.