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Ireland 'Aggressively' Tackling Deficit

by Jason Gorringe,, London

28 September 2011

The Irish government is "aggressively tackling problems", the Finance Minister Michael Noonan has said, telling the Institute of International Finance (IIF) that while the country has returned to strong levels of growth, the coalition will continue to build on this positive momentum, with a view to achieving a balanced fiscal position in the future.

Speaking at the IIF's Annual Meeting, Noonan used his speech to offer an update on Ireland's financial and economic situation, and outline the government's work since its establishment in February. He said that the "government is keenly aware of the risks posed to Ireland by the current global slowdown and we are conscious that we have much work to do". In addition, domestic demand remains under pressure, and expected to do so for some time.

However, Noonan did have a series of achievements to report, including an improvement in price and cost competitiveness, along with solid export growth. Noonan noted an improvement in financial market sentiment to Ireland, referencing the deal brokered earlier this summer, which permitted a reduction in the interest rate charged on Ireland's bailout loans. This, together with the extended maturity now offered on these loans, will mean that the interest rate paid on much of Ireland's debt will be 3% lower than originally estimated, resulting in improved debt sustainability.

Steps have also been taken to balance the public finances, including adjustments of EUR21bn (USD29bn) on an annual basis, equivalent to 13% of GDP. Progress is being made in the joint European Union/International Monetary Fund programme of financial assistance, with Noonan judging the recent reduction in bond yields to be "a strong endorsement of the government's policies and the implementation of the programme". In addition, Noonan sees the stabilization of the banking sector as a key part of the process of regaining investor confidence in the wider economy.

The government has merged and restructured key banks, engaged in recapitalization and deleveraging processes, and returned the banks to a position where they can access normal market funding, Noonan explained.

Noonan admits that Irish citizens "have had to make sacrifices" in terms of higher taxes, lower levels of pay and reductions in public services. However, he is clear that the state "must live within its means". The government intends "to build on the positive momentum by returning our fiscal position to a sustainable balance over the coming years", he said.

Noonan is due to deliver a medium-term fiscal consolidation plan next month, which will include, among other initiatives, a series of changes to the tax system, designed to achieve EUR3.6bn in revenue and savings this financial year.

TAGS: tax | economics | business | Ireland | interest | fiscal policy | banking | gross domestic product (GDP) | budget | International Monetary Fund (IMF) | offshore | tax reform | European Union (EU) | Europe

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