Tax hikes still loom despite ECB deal, warns Honohan
THE Government will still have to introduce serious budget cuts and tax increases despite the promissory note deal, Central Bank Governor Patrick Honohan, left, has said.
A member of the governing council of the European Central Bank (ECB), he was a key player in securing this week's deal.
But Mr Honohan would not be drawn on statements by Taoiseach Enda Kenny and Finance Minister Michael Noonan that it could lead to €1bn less of cuts and taxes over the next few years.
The agreement is "absolutely" good for the country, he said, but "budgetary consequences" were not part of his considerations.
"This is not part of the arrangement we are talking about," Mr Honohan said at the Garret FitzGerald Spring School in University College Dublin last night.
"The budgetary pressures are there, they come from a lot of sources, not just this promissory note. This is an important element of the budgetary pressure which has been relieved but there is still a lot of fiscal adjustment to be done."
He described the deal as "strong" for Ireland and Europe.
"It helps the recovery of Irish balance sheets, of the Irish economy," he said, adding that the actual promissory note has been handed back from the Central Bank to the Government.
"Yes, I understand it has actually been handed back. I don't know if it's been torn up or what they want to do with it but I understand that transaction happened just after I Ieft the office . . . this evening."
He is confident other countries will not look for similar treatment since the promissory notes were "a legacy of a very strange two-week period" about the time of the bank guarantee.
The deal should also withstand legal challenge, he added.
"I only know we are going to win any court cases that might be taken around this because we worked this out very carefully."