IMF foresees deal to reduce Ireland's debt burden
International Monetary Fund officials said Wednesday they are working with Irish and European officials on a plan to reduce Ireland's bank-debt burdens and ease the bailed-out nation's return to normal borrowing on bond markets next year.
An IMF delegation said after meeting government officials that Ireland is fully meeting the terms of its 2010 bailout deal but needs to impose heavier cuts on its unusually generous welfare rates as part of its four-year effort to rein in deficits and save the country from bankruptcy. They said the welfare rates were underpinning Ireland's 14.9 percent rate of unemployment, an 18-year high.
But underscoring the political difficulties that Ireland's coalition government faces as it seeks to keep cutting through at least 2015, about 2,000 anti-austerity protesters marched to the gates of parliament while the IMF delegation were speaking at a nearby hotel.
Many protesters bore placards calling on the public to boycott payment of another austerity measure, a newly created annual tax on every Irish residence. One carried a poster portraying Ireland's government leaders as snakes, while another pictured the same leaders having their heads cut off by guillotine. "Irish problem, French solution," it said.
Another protester wore his body-size placard, designed to look like his head and hands were locked in a medieval stock, adorned with the sardonic plea: BAIL ME OUT.
At a nearby five-star hotel, Ireland's IMF debt collectors welcomed a European Union commitment last month to permit Ireland to renegotiate the terms of its (EURO)64 billion bailout of six Irish banks, the factor that destroyed Ireland's own credit-worthiness and forced the country to negotiate an EU-IMF rescue.
They expressed hope of crafting a plan, in conjunction with Irish and European Central Bank officials, that would be accepted by EU finance chiefs at a summit expected by October. The proposed deal would be designed to transfer Irish bank-bailout debts from Irish national books to the EU's future bailout fund, the European Stability Mechanism.
Ajai Chopra, deputy director of the IMF in Europe and a central figure in negotiating Ireland's 2010 bailout terms, said the EU's U-turn on permitting a renegotiation of nationalized Irish bank debts "offers a welcome path forward to help improve Ireland's economic prospects." He said the IMF was "encouraged" to see that political changes within the EU had delivered "a new political mandate to make meaningful progress in this area."
The bailout accord still requires Ireland to cut its 2012 deficit to at least 8.6 percent of economic output. Ireland beat its target last year, posting a 9.3 percent deficit rather than the 10.6 percent sought by EU and IMF chiefs. The goal is to return to the eurozone's deficit limit of 3 percent by 2016, although Ireland says it can reach this level by 2015.
Craig Beaumont, the IMF mission chief in Ireland, questioned why Ireland provided hundreds of thousands of people with free medical care and paid parents (EURO)140 to (EURO)160 monthly per child. He said both benefits needed to be reduced and child payments should be provided only to low-income recipients, not universally.
Ireland's (EURO)67.5 billion ($83 billion) EU-IMF credit line is expected to run dry in late 2013. Analysts consider Ireland the most likely of the eurozone's three bailout recipients, alongside Portugal and Greece, to resume normal borrowing.