IMF and EU back sell-off of state assets to create jobs
A Government plan to sell off state assets and use the proceeds to create jobs was given the green light by the IMF and EU yesterday.
The black hole in the banks was the main focus of the meetings of Finance Ministers Michael Noonan and Brendan Howlin with the IMF, European Commission and European Central Bank.
The Coalition secured agreement -- in principle -- that it can make changes to the bailout terms and conditions, including restoring the old minimum wage.
However, all proposed changes to the bailout agreement were effectively parked until the results of the stress tests on the banks are known at the end of the month.
Mr Noonan said he did not know if the banks would need up to €35bn contained in the IMF-EU agreement.
"I don't know. I'm going to await [the stress tests]. You know, I'm not a bookie," he said.
The Government is committed to securing at least €2bn from the privatisation of the so-called 'crown jewels' to be invested in creating jobs in energy, water and telecoms.
The bailout meant any such windfalls might have had to go into repaying the country's debts -- but the IMF agreed to the jobs stimulus.
However, under a worst-case scenario, the Government could be forced to put this money into the banks if the black hole is too big to secure funds elsewhere.
The IMF also warned that no money was to be invested until the amounts to be raised were independently verified by an international investment bank.
"They want to see that the money is reliable before new investments are committed to," a source said.
A 60pc fall in house prices and rates of unemployment as high as 15.8pc will be used to assess the financial strength of the banks in the Central bank stress tests.
The unprecedented level of detail on the various scenarios the banks are being measured against comes a fortnight before the publication of the tests results. These will show how much cash Ireland's banks will need to survive an even deeper crash than is currently forecast.
The Fine Gael and Labour Party ministers had talks with IMF European Department deputy director Ajai Chopra, the European Commission's Istvan Szekely and the ECB's Klaus Masuch in the Department of Finance.
NTMA chief executive John Corrigan and Financial Regulator Matthew Elderfield were also involved in the talks. It is understood a series of changes to the IMF-EU programme were discussed.
Mr Chopra is believed to have raised the issue of changes to the way NAMA will operate. The Government's side explained that expanding NAMA further would simply create further losses for the banks at a time when the property market remained fragile.
And the IMF is also understood to have made it clear to the Government it does not expect growth to be as strong this year as government estimates suggest.But government sources say there is a widespread acceptance that there may be some adjustments coming down the track.
The IMF wanted all issues to be examined in the context of the banking situation and to see the agreed capitalisation being proceeded with.
Mr Noonan has accepted the amount of money required at this time may be in excess of the €10bn previously envisaged.
"Everything has to be considered in that context. How much is required? How much can the State afford to borrow? Privatisation does have to be part of that mix" a source said.
Economist Colm McCarthy was not involved in the talks, although he was in the building at the same time finalising the report on state assets and what the Government could sell off.
Also yesterday, Taoiseach Enda Kenny signalled it remained open to the Central Bank to enter into discussions with the US on borrowing money from the Federal Reserve.
Speaking in Washington DC at the start of his two-day US visit, Mr Kenny acknowledged that such a move was a possibility as part of the plan to rescue the Irish banking system.
Brendan Keenan interviews former IMF economist Donal Donovan: BUSINESS P5: