Business Irish

Saturday 16 December 2017

Ireland must cede more control over Budget to EU -- Sutherland

Former commissioner also lambasts those arguing for default and says bank debts are not our biggest problem

International banker and former EU commissioner Peter Sutherland, right, receives the Irish Exporters Association's Gold Trade Facilitation Award from Mark Fitzgerald, president of the IEA, at a lunch in the Four Seasons Hotel, Ballsbridge, Dublin, yesterday
International banker and former EU commissioner Peter Sutherland, right, receives the Irish Exporters Association's Gold Trade Facilitation Award from Mark Fitzgerald, president of the IEA, at a lunch in the Four Seasons Hotel, Ballsbridge, Dublin, yesterday
John Mulligan

John Mulligan

IRELAND should be willing to give Brussels more control over the country's fiscal and budgetary policy as part of any efforts to save the European Union, former EU commissioner Peter Sutherland has said.

The ex-attorney general said it was in Ireland's "vital national interest" to remain a supporter of European integration.

"If the dilemma that Europe is facing at the moment is either to integrate or disintegrate, then we must firmly stand on the side of integration, even though that demands greater ceding of sovereignty in terms of control of fiscal and budgetary policy than we would have envisaged some time ago," he said.

Mr Sutherland, who is also chairman of Goldman Sachs International, supported the Government's stance on the need for a lower interest rate on out EU/IMF bailout loans.

While a firm advocate of European integration, Mr Sutherland said the response of the European institutions to the current economic situation has been "incoherent, inadequate and damaging and unfair in relation to Ireland".

However, he lambasted those who have argued for "burning" senior bondholders or who have advocated default on the country's debts.

"We should stop seeing this (defaulting on senior bank bonds) as a panacea. We have to recognise that whatever the moral rights or wrongs of debt default, we can't do it unless we're allowed to do it.

"We don't have the alternative of ignoring directions that they (the ECB) have given. The reasons are that it risks contagion," said Mr Sutherland.

He also maintained that the reduction in debt, even if a senior default did take place, would be relatively small.

"Yet it has become the main focus of current debate in Ireland when we should be looking at the (budget) deficit figure," said Mr Sutherland.

He added that a bank default would also have serious implications for Irish pension funds and potentially for depositors.

Bondholders

"Default in respect of senior bondholders, who rank in law as pari passu (equally) with depositors, will raise issues which one would prefer not to address about the safety of deposits.

"There are a lot of dangerous things in taking this debate too far."

Mr Sutherland said Ireland's budget debt was rising by about €8bn every year, excluding interest payments on debt.

"Forget about the banks. We're spending €8bn a year on current expenditure over and above what we're getting in," he said.

"So, when we talk about restructuring bonds and debt, we should recognise that.

"We're doing far more damage to ourselves by current over-expenditure than the total aggregation that the additional debt from our banks is causing us."

Mr Sutherland was speaking as he received an Irish Exporters' Association Award for his role in facilitating export trade.

He insisted that people who complained about austerity measures needed to take into account that a lack of such measures would "damage us even more".

Meanwhile, also addressing the event, the president of the Irish Exporters' Association Mark Fitzgerald said Irish exports grew by 9.4pc in the first quarter of this year and were likely to accelerate by 9.1pc for 2011.

He said exports of merchandised goods grew 10.5pc in the first three months of the year, driven by the pharmaceutical sector.

Mr Fitzgerald, who is a board member of Citibank Europe, added that exports of Ireland's entire services sector rose 8pc in the first quarter, driven by computer services.

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