The statement declared that the “comprehensive announcements by the Irish authorities are a major step toward restoring the Irish banking system to health, which is crucial for sustained revival of growth and employment.
“Consistent with the programme supported by the EU and IMF, the Central Bank, together with leading international consulting firms, has identified the banks’ capital needs based on thorough and transparent valuations of bank assets and stringent stress tests conducted with an appropriately high minimum capital ratio, which will ensure a sound capital basis of the banks.
“The EC, ECB, and IMF staffs welcome the rigorous capital needs assessment and strongly support the authorities’ plans to ensure that these capital needs are met in a timely manner. The capital needs can be funded comfortably under the programme supported by the EU and IMF,” according to the statement.
Hinting at possible future sales of state assets, the statement continued: “The related plans to deleverage bank balance sheets, including through phased sales of non-core assets over time, will reinforce the benefits of higher capital and help banks regain access to the market sources of financing needed to enable renewed lending.”
According to the statement, “The Irish government also made important announcements on the future structure of the banking system, and the staffs of the EC, ECB and IMF endorse this strategy to focus on the development of two strong pillar banks with sound business models able to serve the Irish economy’s needs.”
On the same day, the director of the external relations department of the IMF, Caroline Atkinson, made reference to Ireland at a press briefing. Asked whether the IMF believes that the Irish government should restructure unguaranteed bank bonds, she replied: “That is like (asking them): ‘Have you stopped beating your wife?’”
Ms Atkinson stated that she did not wish to discuss the Irish question in depth before the IMF mission to Ireland. She did, however, field questions from members of the press regarding the situations in Greece, Spain and Portugal, which were asked in the light of a political impasse in Portugal and the lowering of Greece’s bond status to ‘Junk’ by rating agency Standard & Poors.
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“I think what is critical about the resolution of the European crisis is that there should be a comprehensive approach, and European leaders have taken important steps towards that most recently with the agreement to establish a permanent crisis mechanism,” said Ms Atkinson. “Other elements of a comprehensive approach include reform to economic governance, further policy actions in individual affected countries, and financial sector reforms.
Ultimately, the success of the country programmes will depend also on there being a successful environment.”
Other countries mentioned at the press briefing that are of fiscal concern to the IMF ranged from the US to Japan, and from Tunisia, Syria, and Egypt to Belarus, Ukraine and Pakistan. While Ireland may be experiencing problems financing its debt repayments, it seems likely that it is in a better position structurally to do so than many of the other countries seeking IMF assistance.
Minister for Finance, Mr Michael Noonan, TD, and Minister for Public Expenditure and Reform, Mr Brendan Howlin, TD, also chose to see positive signs in Irelands economic performance in the year to date. According to a joint statement from the ministers, an exchequer deficit of 7,066 million euro was recorded in the first quarter of 2011. This compares to an exchequer deficit of 3,942 million euro in the corresponding period in 2010.
Commenting on the end of March 2011 exchequer returns, Minister Noonan said: “The Exchequer deficit in the first quarter of the year, at just under 7.1 billion euro, is broadly in line with my department’s expectations at this point in the year, and means that we have met the target set under the joint EU/IMF programme of financial support. Tax receipts in the period to the end of March, at 7½ billion euro, were some 270 million euro above the same period in 2010, but 136 million euro or 1.8 per cent below expectations.
“In the overall context, this is not a significant shortfall. However, today’s figures show a mixed performance in the individual tax categories. VAT and income tax have shown signs of weakness and, given their importance, their performance will need to be closely monitored in the coming months. On a more encouraging note, corporation tax and excise duties have continued the good performance of last year in the opening months of 2011,” said Minister Noonan.
The ministers concluded that: “The Government’s decisions last week to restructure the Irish banks and to improve credit availability are necessary elements of economic recovery. These decisions combined with the implementation of the Programme for Government will put Ireland on the road to economic recovery. The Government is now moving on to the next phase of our plan, the Jobs Fund, which will create a more attractive environment in Ireland for investment and job creation.”
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