IMF will continue monitoring Ireland until 2021
CHRISTINE Lagarde was the uncrowned queen of Ireland yesterday.
As the head of the International Monetary Fund delivered a polished and upbeat speech in the glittering surroundings of St Patrick's Hall in Dublin Castle, it was standing room only as politicians, financial types and representatives from St Vincent de Paul and other charities jostled politely for seats.
The welcome was warm but perhaps that's just as well as the IMF is fast becoming a semi-permanent fixture here. Earlier, speaking to the Irish Independent, she revealed that the Washington-based fund will be closely monitoring Ireland's performance until 2021 at least.
The IMF expects to be conducting bi-annual reviews of the economy for the next eight years as well as an annual review in a process known as 'post programme monitoring'.
"We will hang around until 2021," she told the Irish Independent. The IMF's departure date could be later if loan repayments are delayed or could possibly be earlier if debts are repaid earlier, but 2021 is the agreed date.
While expressing confidence that Ireland will reach the targets set out under the bailout agreement, Ms Lagarde then went on to dismiss the targets as artificial.
"We need not be completely obsessed about nominal targets. There is nothing magical about numbers. What's important is the direction, the pace, the determination," she said.
Wearing a green scarf and flanked by Ajai Chopra, the IMF official who has overseen the Irish bailout, Ms Lagarde repeatedly praised the tremendous "tenacity and resilience" of the Irish people for sticking to the bailout programme.
She acknowledged that it takes time for economic growth to take hold. "The neighbour's children getting a job, being able to spend more – it will come," she promised.
While arguing that Ireland is more than two-thirds of the way through the huge adjustment that will return the economy to a sound footing, the 57-year-old former finance minister also sounded a warning about the banks.
Like many others looking at Ireland from the outside, she seems deeply concerned about the capacity of our lenders to tip the country into another recession. The banks face another round of stress tests later this year, which could force the State to make further cash injections.
While it is too early to say whether this will happen, there are plenty of reasons for worrying about the banks' seemingly endless capacity for self-delusion. Earlier this week, ECB president Mario Draghi warned the banks could well pose problems and urged the government here to get a move on.
Ms Lagarde and Mr Draghi don't seem to agree on much these days, but they agree the banks pose a risk.
She said yesterday that the banks won't be safe until "they have deleveraged and are focused more on lending than trading on their own account".
While "we are seeing some positive signs, there is still work to be done", she added.
While she agrees with Mr Draghi on this, the two leaders disagree on interest rates.
Ms Lagarde repeated a call in January for the ECB to keep its monetary policy easy by cutting the benchmark rate lower than the current 0.75pc rate.