Luxembourg, 14/10/2013 (Agence Europe) - At the start of the Eurogroup meeting in Luxembourg on Monday 14 October, the European Central Bank (ECB) and the European Commission lauded Ireland and Spain as financial aid success stories. German finance minister Wolfgang Schäuble was unable to attend, remaining in Berlin where a new coalition government is being negotiated.
Ireland and Spain should be able to exit the aid programmes in December, but it is not yet clear whether either of the countries will apply for preventive aid from the eurozone in the form perhaps of a preventive credit line just in case at the European Stability Mechanism (ESM) and the ECB as part of the OMT programme to purchase sovereign debt. This would give the markets reassurance when the two countries return to finance themselves unaided, thus avoiding any problems due to high bond yields, lower-than-forecast economic recovery or a domino effect from the debt crisis in Slovenia.
Ireland is clearly a success story, said a member of the ECB Executive Board, Jörg Asmussen, on arrival in Luxembourg. He said it was up to Ireland to decide on the best way of exiting the aid programme, although he noted potential risks in the Irish economy such as the deficit, which is still high as a proportion of GDP. Euro Commissioner Olli Rehn said there was a very real chance that Ireland and Spain would exit the aid programme.
Irish European Affairs Minister Paschal Donohoe said that Ireland wanted to exit the programme in 2013 and the government was looking at all the options, including the idea of post-programme preventative aid. The best-case scenario for Ireland would be publication on Tuesday of the draft budget for 2014 and negotiation of the best exit strategy at the last meeting with the troika of lenders (the European Commission, the ECB and the International Monetary Fund) in Dublin. To prepare for exiting the aid programme, the Irish treasury has set up a €20 billion war-chest.
The eurozone wants Ireland to introduce all the austerity measures laid down in its aid programme, but Ireland says it can achieve the same budget objectives (a deficit of 5.1% of GDP) by tightening its belt a little. The Irish economy is not expected to grow in 2013, but growth might reach 1.8% of GDP in 2014, although there is concern about the public debt burden. (MB/transl.fl)