Thursday 22 February 2018

IMF demanding more wage cuts for public sector

Thomas Molloy

Thomas Molloy

THE International Monetary Fund said it wants further public-sector wage cuts and maintained that reductions agreed under the Croke Park agreement had little effect on Government spending.

The amount of money spent on public-sector wages and pensions as a percentage of gross national product will be 0.4 percentage points less in 2015 than it was in 2008, the IMF said in its latest report on the economy published yesterday. That represents "a relatively modest decline," the report notes.

The report said the IMF "sees advantages in further wage reductions, especially in terms of immediate savings" but noted the Government wants to continue with the Croke Park deal.

The latest report on the implementation of the agreement, published earlier this week, provides a new chance to review the savings that have been targeted and achieved, the IMF added.

It also called on the Government to target child benefit at those who need it, rather than all families, and urged reform of sick leave regulations to force employers to pay the salaries of employees who fall ill for the first few weeks. The system here "is not consistent with international best practice and is vulnerable to lax enforcement," the IMF said.

Turning the the broader economy, the fund said Europe must help Ireland refinance the promissory notes linked to the Anglo Irish bailout and consider taking shares in State-owned banks to help the State return to bond markets next year and avoid a second bailout.

The IMF said Ireland would need a "substantial improvement" in market conditions to achieve the planned return to bond markets which is necessary to avoid a new bailout when the current one expires at the end of next year.

Inspections

"Entering bond markets at reasonable cost and on the scale needed in 2013 and thereafter will require a substantial improvement in market conditions," said the IMF. "These prospects would also be improved by a deepening of financial sector reforms to address remaining issues from Ireland's deep banking crisis, in particular the annual promissory note payments."

Craig Beaumont, the official who heads the IMF inspections here, said the report also contains a warning to the IMF top brass about the political difficulties faced by the Government as it tries to raise €3.1bn every year to repay Anglo's bailout. The €3.1bn is almost the same amount as the sum that has to be cut from the State's budget every year between now and 2015.

Mr Beaumont said there is no "firm timetable" for the release of a technical paper on the Anglo Irish promissory note issue but added that he'd like to move the process ahead at a "reasonable pace." He said the troika overseeing Ireland's bailout view the issue "in very common way".

Finance Minister Michael Noonan told a Dail committee on Thursday that he is to ask officials in the troika to begin looking at the conclusions of the technical group but also gave no timetable.

The Government plans to stop borrowing from the IMF and Europe next year but intends to borrow €20bn on the bond markets the following year.

Growing problems in the eurozone makes it impossible to say whether we will be able to return to the markets, Mr Beaumont added.

The fund kept its gross domestic produce forecast at 0.5pc this year but cut its GDP forecast for next year to 1.9pc from 2pc and downgraded its average GDP growth forecast for 2013-2017 to 2.6pc from 2.8pc on weaker exports and higher unemployment.

Irish Independent

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