Domestic demand on the rise since Budget as 'benign window' takes hold
THE home economy may be finally showing signs of recovery. Domestic demand has probably been rising since the Budget, Michael Noonan has said.
The Finance Minister added in a meeting with TDs and senators yesterday that international political and market sentiment was very strong towards Ireland.
Mr Noonan, pictured, told TDs that personal indebtedness had been reduced by €10bn in the third quarter and claimed people were paying off debt at a rapid rate in Ireland.
He also said it was the objective of the Government and Central Bank to maintain a credit union in Newbridge.
"While we have an awful lot to do yet, I can see signs of increased demand in the market since the Budget," Mr Noonan said.
"Everybody in the Dail I meet from all parties have anecdotes about how if they live in Dublin it's taking them another quarter of an hour to get to work.
"Others are talking about all the trucks on the roads. There's an awful lot of soft data in the system over the last two weeks which suggest that there's a general perception of pick-up."
In a curtain-raiser ahead of a meeting of European finance ministers today and tomorrow in Brussels, Mr Noonan told the Oireachtas Finance Committee that Ireland's exit from the bailout will not be on the formal agenda.
However, it will be discussed on the margins of the gathering of eurozone finance ministers today.
But he said he had yet to give a recommendation to Cabinet on whether Ireland should take an overdraft facility and that he was continuing to reflect on the best course.
"There's a window now where things are calm internationally, calm in Europe, calm in Ireland and the interest rate reduction announced last week by the European Central Bank (ECB) reflects back into interests rates in general," he said.
"We seem to be in rather a benign window."
It comes as Germany said Ireland was a "positive success story", with a spokesman for the finance ministry in Berlin yesterday pointing out that the economy was growing.
However, Mr Noonan said the issue of whether Ireland would be able to tap into Europe's bailout pot, the European Stability Mechanism (ESM), to pay for some of the cost of bailing out the banks will not be discussed at the Brussels meeting.
Mr Noonan also said that the stress tests on Ireland's banks next year will take place at the same time as wider EU health checks. And he claimed the Central Bank sees no need for further capital.
But he said the conditionality had not yet been set down by the ECB. "They haven't defined yet what financial instruments would constitute core tier one capital ratios, so we still haven't the full picture. We're not quite sure on that, but that will be clarified as the months go by."
He said tax credits arising for losses in banks are regarded as core tier one capital, but he said there was a suggestion that under Basel III, this would be stripped out.
Mr Noonan said he expected a long discussion at tomorrow's Ecofin meeting on banking union and EU-wide rules for winding up failed banks, known as the Single Resolution Mechanism (SRM). Ireland's position is that the SRM should cover all banks, similar to the position adopted by the ECB. The Government also believes that the ESM should be used as a backstop for the SRM until a fund, made up of contributions from the banking sector, is built up over the coming years.
Germany, however, has put the brakes on discussions about how to pay for rescuing or winding up any bank that gets into trouble, saying it would require changes in national legislation.
Mr Noonan also said he had concerns about European moves to standardise the VAT returns system.