European commissioner Pierre Moscovici has warned Ireland it must proceed with fiscal consolidation to tackle the State's high public debt levels, following a discussion on Ireland's latest post-bailout review yesterday in Brussels.
Minister for Finance Michael Noonan updated his fellow euro area finance ministers on the latest troika mission to Ireland at yesterday's eurogroup meeting.
While commending Ireland on its progress, the EU economics chief said economic reforms should continue.
“Ireland is experiencing a strong recovery which we are forecasting to continue this year and next year,” the commissioner said, though he warned that the effects of the crisis continue to be felt, particularly in the high level of public debts.
“That’s why we would encourage Ireland to proceed with the implementation of key structural reforms and to make the most of the benign economic climate to proceed with fiscal consolidation and to keep public debt on a steady downward path.”
EU scrutiny
Ireland has an added layer of EU scrutiny compared with most other EU countries under the terms of its bailout, and will be subject to two post-programme visits by the troika each year until 75 per cent of Ireland’s bailout loans is repaid. This could take decades.
While the Government won leeway from the European Commission on how a number of budget targets are calculated last month, the EU's executive arm has consistently argued that Ireland should use the economic recovery to pay down debt rather than increase budget spending. Though the public debt is decreasing, Ireland still has one of the highest debt-to-GDP ratios in the European Union at about 107 per cent.
Mr Moscovici was speaking ahead of his visit to Dublin in a fortnight when he will address the Joint Committee on Finance, Public Expenditure and Reform. The European Commission’s vice-president with responsibility for economic affairs, Jyrki Katainen, will visit the capital next week for two days of talks with officials and investors, when he is expected to promote the €300 billion Juncker investment plan.
Meanwhile, the eurogroup of finance ministers made little progress on the stalled Greek bailout at yesterday’s meeting, with eurogroup president Jeroen Dijsselbloem saying a “comprehensive deal” must be agreed before bailout funds are released to Greece.
Concerns
Despite concerns about the state of the Greek public finances, following last month’s decree ordering municipal authorities to transfer cash reserves to the Bank of Greece, Athens confirmed it would make a €750 million repayment due to the
IMF
today.
Nonetheless, EU officials said privately that a deal for Greece was needed before the end of the month when up to €1.5 billion in regular domestic exchequer payments fall due. The Greek economy is also facing a number of smaller repayments to the IMF next month, as well as €6 billion in repayments to the European Central Bank in June and July.
Speaking ahead of the meeting Mr Noonan expressed concern about the liquidity constraints facing Greece. “The difficulty now is that people are getting concerned, including myself, about the liquidity situation in Greece, and I hope that can be resolved with payments coming up so soon,” he said.
Mr Moscovici said that while there was “still significant divergence” between Greece and its creditors on a number of issues, including pensions and labour market reforms, progress had been made in other areas.
