Business Irish

Saturday 18 November 2017

Country lagging behind Dublin in recovering from crisis – Michael Noonan

Finance minister Michael Noonan pictured talking to John Fraher, right, a managing editor at Bloomberg News during a Bloomberg Television interview of the World Economic Forum in Davos.
Finance minister Michael Noonan pictured talking to John Fraher, right, a managing editor at Bloomberg News during a Bloomberg Television interview of the World Economic Forum in Davos.
Colm Kelpie

Colm Kelpie

DUBLIN is thriving although the rest of the country is still coming to terms with the financial crisis, Finance Minister Michael Noonan said.

He said there were problems now with the supply of housing in the capital but that house prices outside Dublin would only rise very slowly.

Turning to the secret talks between Allied Irish Banks and Department of Finance, Mr Noonan confirmed the bonus cap wouldn't be raised and told AIB officials they would have to perform much better to get a bonus.

"The answer is, 'sorry, guys, much better performance required before we'll even consider a bonus'," he said in a Bloomberg television interview. "It makes no sense and it's not a demand I'm prepared to deal with. They're very high salaries compared to the rest."

The finance minister is on a five-day trip to New York along with senior executives from both the IDA and the National Treasury Management Agency (NTMA) on a charm offensive to attract investors.

He is meeting senior executives from IDA companies as well as NTMA clients and investors.

Mr Noonan's comments came as the Central Bank predicted that the economy would grow by more than 2pc this year as both consumers and businesses start spending again.

Out-going chief economist Lars Frisell said we should face into 2014 with careful optimism but warned against complacency.

In its first quarterly bulletin of the year, officials at Dame Street said slashing both public and private debt levels was still necessary to ensure a sustainable recovery.

Gross domestic product has been revised up fractionally by 0.1 percentage points compared with its previous forecast in the autumn.

But the Central Bank believes consumer spending and investment in business will be much stronger than expected in October, rising 1pc and 8.9pc respectively compared with previous estimates of 0.4pc and 1.6pc.


Unemployment is expected to fall to 11.9pc this year, before dipping to 11pc in 2015. Mr Frisell said cutting unemployment was the way for the "average Joe" to feel the recovery.

"It's a case for careful optimism but not complacency. We see that 2013 started fairly weakly and disappointing exports, but there has been continuous growth in employment," he said.

"(There has been) reduction in unemployment, increased market confidence in the Irish sovereign, and stabilising or even growing house prices. So, going into 2014, it's actually a case for continued, careful optimism."

Key projections include:

* Personal spending will rise 1pc this year and 1.3pc in 2015.

* Public consumption will slump 2.1pc and fall 1.5pc in 2015.

* Gross fixed capital formation will increase 8.9pc this year and rise further to 9.9pc next year.

* Exports of goods and services will increase 3.5pc this year

* GDP will be 2.1pc this year, increasing to 3.2pc in 2015.

The Bank said that while there was little change to its forecast for the year as a whole, the composition of growth was likely to be different, and more balanced between domestic and external factors. It said the projected recovery in domestic demand was still relatively mild, but was still a positive development.

Meanwhile, Mr Frisell said it couldn't be excluded that capital would be needed for the banks after European-wide stress tests later this year. "It's impossible to say. But again our starting point is that the €64bn has been enough," he said.

Asked about AIB's proposal to allow bonuses, Mr Frisell said the Bank wanted to make sure than any incentive programme like bonuses didn't promote the "wrong kinds of behaviour".

Irish Independent

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