EU's 'seismic shift' won't make Budget any easier, insists Noonan
FINANCE Minister Michael Noonan yesterday insisted December's Budget will not be made any easier by the early-morning deal on banking debt.
Mr Noonan said it may bring down the amount of cuts and taxes needed in future Budgets, but could not say by exactly how much.
He said there would be no let-up in the bailout programme, since EU leaders signalled that countries adhering to the strict packages would be helped.
Taoiseach Enda Kenny said the deal was a seismic shift in European policy as he managed to get Ireland's bank debt deal specifically mentioned in the agreement on the new EU bailout fund -- the European Stability Mechanism (ESM) -- being used to put funding directly into the banks.
Mr Kenny said the deal was hugely significant for the country. "The fundamental principle of the ESM providing the funding to break the link between the sovereign and the bank has now been established," he said.
EU leaders want the debt deal completed before the end of the year, and Mr Noonan said he hoped it could be done by October, but warned this still wouldn't leave enough time to change December's Budget.
The precise details of the deal will be hammered out by EU finance ministers early next month.
"It'll probably not make any difference to the upcoming Budget because we have to work through the details of a solution" -- at Eurogroup and Ecofin meetings in Brussels, starting on July 9, he said.
"The statement that came from Brussels said they want things resolved by the end of the year, so it won't impact on this year's Budget."
The main benefit for Ireland would come in better interest rates on the bank debt once it was transferred from Irish balance sheets and into the ESM.
Mr Noonan said better interest rates "will improve the budgetary position in subsequent years but it's impossible to give a figure" and added Ireland's cost of borrowing was already improving, which, he said, would be good for jobs and growth.
Mr Noonan initially said yesterday between €30bn and €40bn of banking debt could be transferred from Irish balance sheets, but later backed away from these figures. He also confirmed the deal would not lead to any debt writedown for Ireland.
"We don't want to be tied into any particular figure. The big effect of this is there has been a major policy change in Europe. It's now European policy to separate bank debt and sovereign debt and they referenced Ireland, in particular."
He also said that some of the Government's shareholdings in the banks could also be moved, along with the debt, to the ESM.
Mr Noonan said the bailout programme would be implemented in full, since "the European authorities are making a distinction between what they describe as well-performing countries who are complying with their programme and, by implication, ones that are not".
"Effectively what they're saying is, if you deliver on your programme, and you accept all the conditions and you continue to deliver them, Europe will give you additional help, and if you don't they won't. So, it's important now, more than ever, that we continue to fulfil the programme down to its last detail."
Fianna Fail leader Micheal Martin welcomed the deal, and said it had "significant potential".
Mr Martin said Ireland had "taken it on the chin" when the bailout was negotiated because the European policy at the time was that countries should take on banking debt.
Mr Martin said this had not worked, and Europe now owed Ireland. Sinn Fein's Gerry Adams said the Government was overselling the deal.