The ECB-EC-IMF troika was in Dublin from 10-19 January for its fifth review of the bailout programme’s implementation. It concluded that the programme is “on track” but with no room for complacency.
The 2011 general government deficit target of 10.6 per cent was not only met, but surpassed at 10.0 per cent. The two pillar banks (AIB and Bank of Ireland) met their 2011 deleveraging targets, selling €15 billion worth of assets at “at a better price than anticipated,” according to the troika. Total deleveraging across government-supported banks amounted to €40.5 billion to the end of November 2011 (the final year target was €34.7 billion). The Government is negotiating with the troika on proceeds from possible privatisation and an alternative to the €30.6 billion promissory note used to fund the Irish Bank Resolution Corporation.
Banking reforms remain central to the Government’s check-list for the first quarter of 2012. The actions required are:
- assessment of the banks’ performance in meeting agreed asset disposal targets;
- monitoring of the banks’ net stable funding and liquidity coverage ratios to ensure convergence with Basel 3 (global) standards;
- reporting on progress in reorganising Irish credit institutions and implementing the Central Bank’s action plan for strengthening supervision of institutions;
- finalisation of new retail planning guidelines, including the agreed changes to retail cap sizes;
- strengthened job activation and training policies and publication of an external evaluation of the revised national employment action plan;
- submitting a reform programme by the Department of Social Protection, targeting social support on those with lower incomes and ensuring work pays for welfare recipients, to the Government; and
- conducting a review and report about the Competition Authority’s resourcing, to see if it is adequate for enforcement of the new legislative framework (a Competition Bill is currently before the Oireachtas).
Five requirements have been given more time following the troika’s review. Publication of legislation on the personal debt regime must now happen by the end of April instead of the end of Q1. The banks’ next stress tests, due by the end of March, are now expected to be done in conjunction with EU-wide tests by the end of November. A decision on the future of Irish Life & Permanent will be made by the end of April (with recapitalisation of €4 billion completed by the end of June) having previously been due by the end of October 2011. Legislation to reform the JLC-REA system (the Industrial Relations (Amendment) (No 3) Bill 2011) will be amended to strengthen the inability to pay clause. The Fiscal Responsibility Bill, with provisions for a medium-term budgetary framework, fiscal rules and a fiscal advisory council will now be published by the end of June 2012 to await the contents of the new EU fiscal treaty.
There was a sense at the troika’s press conference of how delicately poised the programme’s success will be in 2012. It has stated that Ireland’s economic growth rate for 2012 will 0.5 per cent, while the Government has predicted it will be 1.3 per cent. The EU’s economic, fiscal and political outlook remains uncertain, and the level of austerity and banking support required remains contentious among some of the public.
“I am not denying the social consequences of this programme [and] the difficulties involved,” the European Commission’s István Székely told reporters.