Government has 'free choice' on credit line as bailout ends
THE Government will decide whether to take out an overdraft facility before we leave the bailout next month, Finance Minister Michael Noonan said as he hailed its "historic" end.
His confirmation that a decision is imminent comes despite advice from troika sources that the Government could wait until the new year to apply for a so-called precautionary credit line to ease the transition from bailout to full market access.
Mr Noonan insisted the State now has two choices – apply for a credit line before December 15 or opt to go it alone and have a "clean exit" – but he still wouldn't say what way the Government was leaning.
As the troika wrapped up its final review mission, the minister said it was a "free choice" for the Government and that no pressure was being exerted on the State. Taoiseach Enda Kenny (above) hailed the end of the troika's final bailout review as "historic" and fuelled the speculation the State may end up leaving the bailout without the aid of a credit line.
He claimed the Government will make a decision "of clarity and certainty that we are moving on". Mr Noonan has been holding a series of international meetings involving the IMF and European leaders to gauge whether the country should apply for a credit line to smooth the transition from bailout to accessing the international money markets on a full-time basis.
"It's a free choice for the Irish Government which after today is fully sovereign again – we don't have the influence of the troika," he said.
"We're in a position to decide, as a government, which course of action is in the best interest of Ireland. It's a free choice. We're not being pressured by anybody."
Crucial to any decision will be the level of conditions attached, which could be imposed even if the Government opts to apply for it but not draw down any money.
The Government has said the decision is finely balanced and could go either way, with the State's debt management agency building up a €25bn cash buffer, which Mr Noonan described as a significant backstop in itself.
"It's still an open question. There are a lot of advantages on both sides of the discussion," he said.
He said Ireland's economic position was "quite strong" and he denied looming banking stress tests, due to be concluded before the end of next year, made the need for a precautionary credit line more pressing. But he admitted the stress tests could reveal an unexpected cash crisis in the country's banks, but said that was true for any bank in Europe.
"I see the stress testing of the banks as an entirely separate issue from the exit. It's part of the move towards banking union.
"Obviously the European Central Bank doesn't want to take over supervisory control of any European banks without knowing what kind of order they are in.
If issues arise (from the stress tests), they'll arise, and we'll deal with them. But the banks are much stronger than they were."
Meanwhile, the IMF warned that high unemployment was the most important challenge facing the State. Ireland mission chief Craig Beaumont said three-fifths of those out of work have been unemployed for more than a year.
And Mr Beaumont said progress wasn't as fast as hoped in tackling mortgage arrears, warning the problem was a "cloud of uncertainty" that was hanging over the banks and property market and threatened to hold back Ireland's recovery.
by Sarah McCabe, Colm Kelpie and Fionnan Sheahan