No Country is an Island: Ireland and the IMF

by iMFdirect

Speaking to the pain and anger of the Irish people at the toll the economic adjustment has taken on their daily lives, the IMF’s mission chief Ajai Chopra was clear during a press conference today in Dublin:  the end goal is to protect the poor and most vulnerable people in society while restarting the economy.

“We would all agree the key objective is to get growth going again, to create jobs, and bring down unemployment and that will be the true mark of success,” said Chopra.

Listen in here: 

Chopra pointed out if it wasn’t for contagion risks amid turmoil in European financial markets, Ireland would have significantly lower bond spreads.

The problems that Ireland faces are not just an Irish problem; they are a shared European problem. 

“What is critical now is for Europe to dispel the uncertainty that has been created by the lack of progress, as perceived by markets, to decisively handle this crisis by implementing consistent and cooperative policies,” said Ajai Chopra, the IMF’s mission chief for Ireland.

The IMF along with the European Central Bank and the European Commission were in the emerald isle for the regular quarterly review of the government’s economic program.

The Irish plan is in good shape – the government has met all the targets, the program is well financed and on track, and the forecast is for positive growth this year.

Bond spreads in Ireland have widened but If it were not for contagion, we’d be seeing a very different result, Chopra said.

Ireland needs to be judged on its own merits and has five positive elements:

  • signs of growth after three years of contraction in the economy
  • banks are being recapitalized and there is a comprehensive plan to reduce the size of the banking sector and focus on core business
  • the fiscal program is credible and on track
  • competitiveness is improving
  • the government has the political will and determination to implement the program

8 Responses

  1. No Land is an Island Because of Globalization
    —————————————————————
    Mr. Chopra’s optimism about Ireland’s future is commendable. But a nation of only 4.6 million with an annual GDP of US$ 210 billion having currently Debt to GDP ratio of 120% is depressing. Whether this is due to spill over effects or mis-allocation of resources. the present situation is however quite bleak.

    Mr. Chopra’s proposed five positive elements apparently encouraging, will need strict, constant and timely surveillance to ensure their feasibility and implementation. As proposed by IMF. formula of burden-sharing of loss by subordinated debt holders will further reduce investors’ confidence in the Irish banking sector. (Currently available loan facility from European Union and other EU members is Euro 45.0 billion and from IMF Euro 22.5 billion as Extended credit Facility)

    Best viable option under the circumstances is to have tight fiscal consolidation by maximizing revenues and controlling expenditures.This can only be achieved by improving economic governance by the Irish people themselves.

  2. Hospitals forced to close wards to meet their much-reduced budgets this year, operations canceled though there’s already a waiting list of over 50,000, fuel/phone/electricity subsidies cut to the elderly & the poor; meanwhile, at the insistence of the ECB, under menacing threat, hundreds of millions paid in failed private bonds every month (http://bondwatchireland.blogspot.com) from the Irish public purse, all that money borrowed from the ECB at their own penal rates – please, can anyone justify this?

  3. What load of rubbish. I am Irish and I can tell you. These so-called Irish banks do-not give a toss about what anyone might have to say. These three main Irish banks are only INTERESTED in one thing, as long as these banks know that the FOOLS within the i.m.f/e.u/e.c.b are going to give them money. The longer they will take to get their house in order. I’ve said it before someone within the e.u has vested interest in helping these banks get more and more money; and we are not talking about the bondholders. I for one do-not believe the international bondholders should be made to take a hit. Why should they? If a country needs a bailout from the bond-holders. Why not pay half to the bond holders start the repayments period on the monies left ‘say’ after 5 years that should give the country time to get its house in order. Time to put a stop to the corruption within these banks.
    Once and for all.
    Philip j Carroll
    member of E.e.a.g ‘ire’

  4. It’s almost beyond belief that the IMF is lending its credibility and reputation to a deal in Ireland that will see this nation of 4.6m people with an annual GDP of $210bn, burdened with private bank bondholder debt.

    The IMF’s plan for Ireland will see a peak debt:GDP % of 120%, of which 45% will be due to the state pouring up to $100m into failed banks. Without this bank debt, Ireland’s debt:GDP would peak at 75% – high but manageable.

    Indeed the IMF has expressed the opinion that senior bondholders in Irish banks should burden-share losses in Irish banks. And your partners in the Irish bailout, the EU, has a Stability and Growth Pact which caps debt:GDP at 60%. And with each payment of a bond, Ireland floats further and further away from that cap.

    Our country fully accepts its responsibilities to eliminate the budget deficit. We had a fiscal shock in 2008 with the collapse of our property and banking sectors. And we are rebalancing our economy so as to live within our means, and everyone in Ireland accepts that.

    But it is repugnant to see the IMF force our country to repay 100%, bondholders in private banks. You in the IMF have just about shrugged off the reputation for severe austerity measures in developing countries in decades past that have caused huge societal pain. You now risk a new reputation for sitting on your hands and abandoning your principles in respect of unsustainable debt.

    You can view all bonds repayable in Irish banks here, which tracks each and every bond payment and sets these payments against cut-backs in our society.

    http://www.facebook.com/pages/Bondwatch/136610376421120

  5. […] No Country is an Island: Ireland and the IMF Posted on July 14, 2011 by iMFdirect […]

  6. Thanks Mr Chopra for your honesty and being the reasonable voice in our bailout.It doesnt seem to be acknowledged in Europe that we are doing our best,though their banks were complicet in creating our
    problems,which could never have happened were we not EU.members.

  7. Well said Ajai Re Our european partners – Can honestly say your the only one of the delegation this week that the irish people listen to with any respect and beleif! Well done!

  8. It is mentioned that the program is on track with “banks deleveraging so that they can focus on their core activities”

    That sound very nice, but the fact is that no one can be really sure what is meant here with “core activities”, because no bank regulator has spelled that out explicitly over the last couple of decades.

    Implicitly, because of how the capital requirements for the banks are structured and biased in favor of the bank lending to the government and the triple-A rated, it would seem that the regulators believe those are the core activities of banks, but, frankly, if this is so, It is hard to visualize any real possibility of a healthy and sustainable economic growth.

    Could Ireland be thinking of ignoring the Basel Committee’s recommendations and for instance set up capital requirements for their banks that are more based on job creation and which is something that would at least require eliminating the regulatory arbitrary discrimination against small businesses and entrepreneurs? http://bit.ly/mQIHoi

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