Business Irish

Wednesday 21 March 2018

ECB: Ireland should stick to austerity target in budget

Joerg Asmussen. Photo: Getty Images
Joerg Asmussen. Photo: Getty Images

IRELAND should not ease up on austerity the budget next month but stick to a target of €3.1bn worth of spending cuts and tax hikes, European Central Bank Executive Board member Joerg Asmussen said today.

Ireland last year beat the deficit target under the bailout, leading to calls by government ministers for a more modest fiscal adjustment than agreed with lenders the European Union, International Monetary Fund and European Central Bank.

"I would really suggest to stick to the budget plan for the next year and to stick to the figure of €3.1bn" Asmussen said in an interview with RTE.

"It is crucial the authorities stick to the programme's objectives as they have done to ensure the country remains on a sustainable path," he said.

Asmussen's comments echo those by the International Monetary Fund in July when it called on the government to stick to the target.

He was upbeat about the country's growth prospects, saying recent data supported expectations of a gradual recovery in economic activity in the second half that would help ensure the country exits its bailout on target by the end of the year.

He said the risk of additional recapitlaistion of Irish banks due to mortgage arrears was not a particular concern.

But he also said he did not expect the government to be successful in its bid to use the euro zone bailout fund, the European Stability Mechanism (ESM), to retroactively recapitalise the country's banks, possibly by buying shares.

Finance Minister Michael Noonan has said the government plans to submit proposals to its European partners before the end of the year on the use of the ESM to ease the burden of Ireland's bank recapitlaistion.

"As I observe the situation as it stands currently, I would not see a majority for the retroactive use of the ESM for direct bank recapitalisation," Asmussen said.

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