EUROPE'S RESPONSE:THE EUROPEAN Central Bank and the EU Commission backed the new banking plan, but each said the its credibility rested on the immediate adoption of stringent new austerity measures for the next four years.
Asked if he was in any way alarmed about the large increase in the cost of the bank rescue, ECB chief Jean-Claude Trichet said observers and analysts had already known about a “large deal” prior to the Government’s statement.
“What is absolutely key for us is the credibility and the delivery of this unequivocal commitment to correct the excessive deficit by 2014,” he said.
“It’s very important that we have this very important work now to develop the multiannual strategy.”
The ECB was studying “all these measures”, he said, adding that the bank considered a new four-year programme of austerity measures to be “very, very important”.
Mr Trichet was speaking in Brussels after a meeting of euro group finance ministers, who received a telephone briefing on the new measures from Minister for Finance Brian Lenihan.
Present at the meeting was Klaus Regling, head of the €440 billion euro-group rescue net for distressed members of the single currency, who welcomed fresh austerity measures from Portugal and the new Irish plan.
“My central scenario that the European Financial Stability Facility [EFSF] will not become financially operational was also confirmed this morning in particular because the relevant countries announced additional consolidation steps,” he said.
Mr Regling said the EFSF was fully operational, had the support of the German public debt authority and could start to raise funds whenever needed.
After the same meeting EU economics commissioner Olli Rehn said the cost of the banking rescue was very large but manageable on condition that the Government came up with a convincing austerity plan for the years to 2014, he added.
“We support these plans and we stand by the Irish Government and people in these very difficult times,” he said.
“We fully back the Irish strategy both concerning the repair and concerning fiscal adjustment once it will be specified, as said, on the basis of a four-year fiscal plan indicating concrete measures, year by year, sector by sector.
“The Irish Government has now done very thorough work and presented a comprehensive and I trust final cost of the problem of the Anglo Irish Bank and other banks. It’s a one-off cost, a one-off measure, which will be reflected in this year’s deficit figures.”
Mr Rehn did not specify the nature of the measures he wants to see and gave no indication of the scale of the fiscal measures he would want next year or in any of the following years.
“We are doing everything on our behalf to facilitate that the Irish strategy will be a success,” he said.
Luxembourgish prime minister Jean-Claude Juncker, who presides over the euro group, said it was the Irish Government that raised the question of the new plan when ministers gathered in Brussels for their biannual informal meeting.
“We are confident that the Irish authorities will be able to deliver a multiannual adjustment programme leading to a budget deficit lower than 3 per cent in 2014,” said Mr Juncker.
“We view the comprehensive statement of the recapitalisation needs of the banking sector as an important and helpful clarification of the situation.”
Minister of State Dara Calleary, who represented Mr Lenihan at the meeting, said the Government was fully confident that it had brought finality to its “banking situation”.
There was no formal discussion about Ireland when the ministers gathered for lunch with International Monetary Fund (IMF) chief Dominique Strauss Kahn, he said.
“We’re absolutely committed to working on the four-year plan, working with the commission, working with the ECB, and . . . there’s full agreement around the Cabinet table on this,” he said.
