Brussels, 25/11/2010 (Agence Europe) - The four-year austerity programme that the Irish government unveiled on Wednesday is a “good starting point” for the current discussions between the Irish government and representatives of the European Commission, the ECB and the IMF, explained a spokesperson for EU Economic and Monetary Affairs Commissioner Olli Rehn on Thursday 25 November. The negotiations between Ireland and the three international organisations will continue until the end of the month and will formalise a three-year aid package of some €85 billion to stabilise public finance in Ireland and restructure banking in the country. In this connection, the Commission spokesperson said that the European representatives would convey a “single message”, denying reports in the press about disagreements between the EU and the IMF on how the banks' senior bondholders should cover some of the cost of restructuring the banking industry.
On Wednesday evening, Rehn issued a statement in which he “welcomed the continued commitment of the Irish authorities to reducing the deficit to below 3% by 2014” (see EUROPE 10263). He said that the austerity measures to make €15bn of savings over four years are balanced in terms of public spending (€10bn of cuts) and increased tax revenues (an extra €5bn is forecast). He added: “A 2011 budget involving a consolidation effort of €6bn, would be appropriate, as it would strike a balance between allowing the nascent recovery to strengthen and addressing budgetary challenges in a timely fashion”. The Irish government coalition is looking increasingly shaky and part of the opposition may take over running the government in January 2011, so the government will not find it easy to get the 2011 budget agreed upon.
The publication of the four-year austerity programme does not appear to have reassured the markets, which are betting on Portugal and Spain joining Ireland in requesting aid. Rehn's spokesperson said that the EFSF can lend out up to €440bn and is substantially and suitably financed in response to questions about comments by the governor of the Bundesbank in Germany, Axel, who said that if necessary, member states could increase their EFSF guarantees. (M.B./transl.fl)