THE GOVERNMENT will have to indicate to Brussels within days the shape of its four-year plan to stabilise the national finances and meet the potential €50 billion cost of rescuing the banks.
However, Opposition parties have indicated the Government cannot count on cross-party support for the plan which will extend beyond the life of the current Government.
Fine Gael finance spokesman Michael Noonan said any future Fine Gael-led coalition would not necessarily be bound by the approach adopted by Mr Lenihan and his colleagues in their four-year plan.
“Without seeing the documents that he’s going to produce in November, I’m not going to make any commitment to the ways and means of getting to the destination which he will outline,” Mr Noonan said.
Labour finance spokeswoman Joan Burton called on the Government to arrange confidential briefings for the Opposition on the financial situation, adding that it was “almost national sabotage for the Department of Finance not to be properly briefing the Opposition on a private basis”.
The plan is intended to return the national finances to a sustainable path, defined by the European Commission as running annual exchequer deficits of less than 3 per cent of Gross National Product (the value in monetary terms of the goods and services produced by the economy).
EU economics commissioner Olli Rehn said yesterday that: “In order to make this fiscal plan convincing, it has to be multi-annual, meaning for four years 2011 to 2014, and the concrete measures need to be specified year-by-year sector by sector”. Mr Rehn said talks with Irish officials have already begun.
Minster for Finance Brian Lenihan refused to discuss potential revenue-raising measures yesterday or specific spending cuts. But Government sources said the plan – which has to be submitted by early November will be “comprehensive” and “concrete”, including tangible targets, identifying savings, revenue-raising areas, as well as potential growth areas in the economy.
Taoiseach Brian Cowen appeared to rule out reopening the Croke Park agreement which has traded a moratorium on public sector pay cuts for promised reforms.
Mr Lenihan said that, to underline the strength of the Government’s resolve, additional significant measures would be taken over and above the €3 billion budget adjustment target already announced.
The Minister was speaking as he announced the State’s fourth attempt to prop up the beleaguered banking sector. This comprised €17 billion in further bailouts, bringing the up-front cost of the banks to the State to €45 billion and possibly as high as €50 billion.
Rising losses on property loans moving to the National Asset Management Agency have increased the cost of the Government bailouts.
The further bank bailouts were announced yesterday to calm fears in the financial markets about the full scale of the bank costs and whether the Government could afford them.
State-owned Anglo Irish Bank will now cost at least €29.3 billion. This could rise to €34.3 billion in a worst-case scenario if the property market fails to recover for 10 years.
AIB requires a further €3 billion, which will bring the State's largest bank under Government control with a stake of more than 90 per cent. The bank's effective nationalisation means a fourth Irish bank is falling into State hands. The Irish Timeshas learned the Government sought the resignations of AIB managing director Colm Doherty and chairman Dan O'Connor as a condition of the State's second bailout.
The bank has ruled out “golden parachute” payments being made to Mr Doherty and Mr O’Connor. Mr Lenihan said they would receive only what they are legally entitled to.
The Government and Central Bank are not planning to allow the appointment of any insiders to key management jobs at AIB. They will also appoint new board members in a bid to reform the culture of the bank.
It also emerged AIB was only informed by the Central Bank late on Wednesday that it would need a further €3 billion on top of the €7.4 billion capital bill set last March to meet higher Nama losses.
