September 9, 2013 12:11 pm
Ireland’s deputy prime minister has accused international bailout lenders of treating his country like an economic experiment and said €3.1bn in budget cuts and tax hikes demanded by them for next year should be scaled back.
Eamon Gilmore, leader of Labour, the Irish government’s junior coalition partner, said imposing that level of austerity risked damaging the country’s fragile economic recovery and society more broadly.
“We will not let the Irish economy become some type of economic experiment for austerity hawks,” he said in an interview. “Austerity alone is not sufficient for economic recovery or social stability.”
Mr Gilmore’s comments reflect growing austerity fatigue in Ireland, which has implemented €28bn in belt-tightening measures since its economy crashed in 2008.
But they come at an sensitive time, with some EU officials expressing concern that Ireland could be bounced back into another bailout once it emerges from its current €67.5bn programme in December.
Any sign Dublin has lost the appetite for belt-tightening could raise questions among bond traders about Ireland’s ability to pay off still-high debt levels just as the government is looking to return fully to the financial markets. The government is currently attempting to negotiate €10bn line of credit with its international lenders – the EU and International Monetary Fund – as a backstop to smooth its return to the market.
Labour has borne the brunt of public anger because it promised to protect voters against the worst cuts during the last election campaign. A recent opinion poll showed Mr Gilmore’s personal satisfaction rating has slipped to 16 per cent, which is below the level of former prime minister Brian Cowen a few months before he lost power at the height of Ireland’s financial crisis. Its larger coalition partner, Fine Gael, is more cautious about easing up on austerity in a 2014 budget due to be announced next month.
Mr Gilmore said the full €3.1bn austerity package was not needed to enable Ireland to meet the programme’s deficit target of 3 per cent of gross domestic product by 2015.
“We are committed to achieving the 3 per cent target. But we are not obliged to do more than that, nor should we do more than that,” he said.
“The only argument that has been put forward [for the €3.1bn cut] is: ‘Let’s see how far you can drive the speedometer.’ Well, we are not an economic experiment in this country,” he said.
Relations between Dublin and bailout lenders deteriorated during the summer over the 2014 budget. Alarmed by data showing Ireland slipped back into recession in the first quarter, the IMF said it would “attach priority to the level of adjustment”.
Mr Gilmore said he did not think investors would question Ireland’s commitment to fiscal discipline if it eased up in 2014. He said Ireland had met all programme commitments and the debate had moved on in Europe, where there is a growing consensus that drastic austerity is self-defeating.
We will not let the Irish economy become some sort of economic experiment for austerity hawks. Austerity alone is not sufficient for economic recovery or social stability
- Eamon Gilmore, Irish deputy prime minister
Ireland should be provided with the widest range of options available, he added, including access to the European Central Bank’s sovereign bond buying programme, to help it become the first of the eurozone’s five bailout countries to exit its programme.
Dublin recently decided to hold a parliamentary inquiry into its banking crash, which forced the country into the bailout in 2010 when it could no longer raise enough cash to shore up its banks.
Many Irish officials believe the ECB exacerbated Ireland’s problems by forcing Dublin to pay off all secured bondholders in the largest failed bank, Anglo Irish. Mr Gilmore said he wants Jean-Claude Trichet, the ECB chief at the time of Ireland’s financial implosion, called to give evidence at the inquiry.
Although ECB presidents in the past have resisted appearing before national parliaments, Mario Draghi, the current ECB president, agreed in October to appear before the German Bundestag to explain the bank’s controversial bond-buying programme. That was followed in February when he similarly briefed Spanish parliamentarians.
“The public are entitled to known what happened,” Mr Gilmore said of Mr Trichet’s role. “There is accountability for all public bodies whether they are national or European.”
Additional reporting by Michael Steen in Frankfurt
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