FitzGerald government was warned it ran risk of IMF bailout

Secret memo from September 1984 said public finances not ‘assured’ until end of year

The serious threat of Ireland needing an international bailout was hanging over

Garret FitzGerald’s government 30 years ago, a confidential document released by the National Archives has shown.

A secret memo to the government in September 1984 warned “the financing of public expenditure even for the remainder of this year cannot be assured”.

The document, from the Department of the Taoiseach files, said: “If the government are forced to approach the European Community or the IMF for assistance, this will be given only on condition which will impose on the economy from without decisions far harsher than those now contemplated.

READ MORE

“The international banks keep our position under constant review; they visit the department of finance regularly and question officials closely on the developing budgetary situation.”

National debt

The national debt had grown from £1.622 billion in 1974 to £15.754 billion at the end of 1983. Ireland topped a table of countries with high foreign debt as a percentage of gross national product, ahead of Argentina, Venezuela, Chile and Brazil; the figure for Ireland was 53 per cent, while the UK figure was 4 per cent. Unemployment was at 16 per cent.

In the memo circulated by then minister for finance Alan Dukes, dated September 5th and stamped “Secret”, the government was warned of the “serious problems facing them” in reaching the target set for borrowing from domestic sources to finance the 1984 exchequer borrowing requirement.

Mr Dukes said it was likely the target would not be achievable without a reduction in the borrowing requirement by “further and immediate cuts” in spending and an increase in interest rates. As this was the era before the euro, the government could control domestic interest rates.

“The severity of the increase in interest rates and the consequential damaging effects on the economy will obviously be dependent on the extent of the expenditure cuts,” the memo said.

Read More

Recommended