A Look At Progress in the Key Areas
KEY ECONOMIC & POLITICAL TASKS
• In 2011, we stabilised the public finances, the banks and the jobs market. In 2012, we will implement the radical reforms needed to create jobs by returning the economy to strong growth (Action Plan on Jobs, NewERA, Pathways to Work, bank lending).
THE BAIL-OUT AND THE CURRENT REVIEW
• The coalition Government is delivering on its key economic commitments and the requirements of the bail-out programme.
• There is now a high and growing degree of trust between this Government and our official funders, allowing to enhance the Programme on an ongoing basis to return the Irish economy to strong growth and to restore market confidence in our public finances and banking system
• As the NTMA has confirmed, we are committed to a phased return to market funding when conditions are right, hopefully at the end of this year.
• Talk of a second bail-out is unhelpful. We have funding under the current Programme until the end of 2013, and our partners have made it clear that as long as we continue to implement our Programme we will receive continued support, without Private Sector Involvement.
• A focus of the current review is to ensure that the burden on the Irish taxpayer of recapitalizing, deleveraging and funding the banking sector is entirely manageable. We believe that progress in this area could be the “final push” needed to get Ireland back into the markets as planned. Technical discussions are proceeding at expert level on this issue.
PUBLIC FINANCES
• The deficit is likely to have come in under 10% of GDP in 2011 – compared with a target of 10.6% of GDP
• Our budget plans for 2012 and beyond are based on conservative growth assumptions (at a mid range between the most optimistic and pessimistic forecasters), and we remain confidence that the €3.8bn in measures taken in the budget will be enough to hit our deficit target this year (8.6% of GDP)
• We estimate that 70% of the austerity programme needed by 2015 is now complete. We have set out in unprecedented details our plans for closing the deficit in the coming years.
• Our plans to close the deficit are “jobs friendly”. For example, they not include any increases in income tax or corporation tax or further increases in VAT, and they maintain high levels of investment in enterprise, research and innovation.
THE EURO AND THE FISCAL COMPACT
• Membership of a strong, stable single currency area remains a fundamental pillar of Ireland’s long-term economic growth and jobs strategy.
• Market trust in the eurozone will improve when EU leaders stop the blame game and are seen to start trusting each other again.
• We are happy with the direction of negotiations on the “fiscal compact”. Long before any discussions of a new set of fiscal rules for the eurozone, the new Government had committed itself to legislate for equally challenging domestic deficit and debt rules.
• More binding, durable and enforceable fiscal rules are necessary for the eurozone, but they will only restore confidence if they go hand-in-hand with a more credible funding guarantee for countries that are pursuing sound economic policies.
• That is why we welcome the decision to bring forward the establishment of the European Stability Mechanism, and willingness to review the scale of resources available to it.
• The bigger the firewall against market contagion, the better. We remain hopeful that, as new credible fiscal rules for euro countries are agreed, the ECB will be confident that it can play a fuller role in stabilizing the eurozone sovereign debt markets without risking its anti-inflation credentials.
• We don’t expect the new fiscal rules to have any impact on the fiscal targets agreed as part of the Programme. We will continue to implement our plans to bring the deficit down to under 3% of GDP by 2015.
• As with other international agreements (e.g. Kyoto and emissions reduction commitments), the fiscal compact will be binding and durable in nature, but we will only have a referendum if we need to change to constitution to ratify the agreement.
• We have made no link between ratification of the fiscal compact and ongoing improvements in the bail-out terms. We have made it known since coming into office that, as we build up credibility through rigorous implementation, we will seek to improve the bail-out terms in order to restore market confidence and growth in the Irish economy as quickly as possible.
• Ultimately, the debt crisis will only be fully resolved through stronger economic growth. That is why the Taoiseach and UK PM David Cameron agreed at their recent meeting to work together and with the European Commission and other countries to put more emphasis on growth and jobs in the discussions at EU level. Areas that need greater focus include:
• Better use of EU budget resources to support strong growth in new industries
• Deepening and broadening the single market in areas like services, energy, transport and high-tech industries
