'No green light' to ease up on austerity, Ireland warned
IRELAND won't be given a "green light" to ease up on austerity measures in favour of efforts to boost economic growth, ECB president Mario Draghi said yesterday.
The comments came as his officials and teams from the EC and IMF meet with the Government this week to review progress on Ireland's bailout programme and discuss future measures. After two punishing budgets, some had hoped that the authorities might begin to focus on fixing Ireland's public finances by growing revenue instead of pursuing more spending cuts.
Mr Draghi yesterday told reporters that there was "no doubt" that countries' economies would shrink if governments pursued spending cuts and did not take the necessary steps to "enhance job creation" and target growth.
But he shot down suggestions that Ireland might be allowed to substitute growth for austerity. "There is no green light (to do that)," the ECB chief told reporters yesterday. "Growth creation must be a primary objective but that doesn't mean there aren't equally important objectives.
"You have to have job creation through structural reforms, that's the key thing... to undertake the necessary structural reforms that could enhance competitiveness, job creation and growth."
The ECB's targeted structural reforms in Ireland include reducing the public sector wage bill, reforming the professions and dismantling agreements that force high wage levels in struggling sectors such as construction. These issues are expected to be raised at the current review mission.
Mr Draghi said "stressed countries" were undertaking "very substantial" reforms already and had made "very substantial progress" in getting their finances in order.
"There's no doubt about that," he added. "To some extent the markets are actually showing some appreciation for this."
Struggling Italy managed to sell €12bn of one-year bonds yesterday, hitting the target set by Rome.
Spain also had success on the bond market in recent days, selling almost €10bn of three- and four-year bonds at significantly lower rates than those achieved at a similar auction in April.
Ireland has been selling new bonds, but the amount of interest demanded by investors on existing 10-year Irish bonds has fallen in recent weeks to 7.5pc , and the Government has insisted Ireland will be able to issue new bonds in 2013.
Mr Draghi also stressed that a programme to write off some of Greece's debts was "unique and exceptional" and would not be repeated for other bailed-out countries. The Greek effort had triggered consequences that were "well over and above" what anyone had expected.