Kenny rejects watchdog's warnings over bailout exit

Enda Kenny

Niall O'Connor

THE Taoiseach Enda Kenny and two senior cabinet ministers have rejected a watchdog's criticism of the decision to exit the bailout without a safety net.

And Mr Kenny said he is not concerned that the Government and the Fiscal Advisory Council had differing opinions regarding the severity of the Budget needed in order to meet growth targets.

"The Fiscal Council is independent, we have every confidence in its independence and its integrity and in its competence," said the Taoiseach.

"But Government must answer to the Dail and answer to the people, and Government has to make the decisions itself."

Finance Minister Michael Noonan, meanwhile, said he was "convinced" the Government took the correct "judgment call" in exiting the bailout without a safety net.

He said state-owned banks were already finding it easier to borrow from the financial markets. And his remarks were supported by Tanaiste Eamon Gilmore, who said he had "no doubts" over the decision to exit the bailout on December 15 without a precautionary credit line.

The Irish Fiscal Advisory Council yesterday criticised the decision and warned that the Government faced an increased risk of meeting its 2014 deficit target.

Council chairman Professor John McHale said the Government ignored its advice to avail of a precautionary credit line which he said would have provided a "further layer of protection".

BENEFITS

"I think you wouldn't want to exaggerate the benefits of a precautionary credit line in reducing risk, but it does give just one further layer of protection that we keep our borrowing costs low," said Prof McHale.

But the decision was staunchly defended by Mr Noonan, who added that two state-owned banks successfully borrowed €1bn from the markets this week.

"Both AIB and PTSB went into the market this week and raised €500m each and got it at very good rates. You'll know that both of those banks are fully owned by the State, so in effect they are surrogates for the State when they enter the markets," he said.

Meanwhile, Mr Gilmore told the Irish Independent that the Irish Fiscal Advisory Council was known for "pushing the boat out" in terms of its advice.

"They've provided formal advice now on a number of occasions, and I think you would have seen that they do push the boat a little bit out in terms of the advice they give and we understand that," he added.

In its latest Fiscal Assessment report, the council said the long line of austerity Budgets should come to an end in 2015 or the following year.

However, it stated that significant risk remained and a period of disappointing growth may continue longer than expected.