The Irish government will Sunday ask for the Cabinet’s approval of a financial bailout from the EU and the IMF, according to finance minister Brian Lenihan. The size of the emergency loan is still unknown. Irish financial politician Michael Noonan predict a dramatic call for spending cuts – all over the board – from the IMF.
“They’ll be looking for the dropping of programmes and a totally new way of delivering services to the public which will cost less with fewer people.”
As the second EU member now prepares to be bailed out of its financial problems by the European Union and the International Monetary Fund, the IMF is getting more worried than ever and are planning a total spending overhaul.
Irish finance minister Brian Lenihan confirms that a formal application for an emergency loan from the EU/IMF is being drawn up.
The Irish Times reports that the Irish government will seek the Cabinet’s approval for the loan today, Sunday.
Following several days of negotiations with IMF/EU officials in Dublin, Mr. Lenihan says he would recommend that Ireland applies for an unspecified bailout loan.
The minister also says he reviewed the negotiations last night and decided that the time was right to make an application for loans for both the State and the banking system.
In an interview with RTÉ Radio Brian Lenihan says: “I will be recommending to the Government that we should apply for a program and start formal applications.”
He declined to be drawn on the exact size of the loan. When asked about the scale of the loan, Mr Lenihan confirm that the figures would be “tens of billions,” however “nowhere near” the EUR 70 – 80 billion as indicated by economists and commentators.
The Irish minister points out that the interest rate charged on the loan has yet to be agreed on, but it will be signficantly lower than the rate currently available to the Government on international bond markets.
Mr. Lenihan also admits for the first time that the nation’s banks has become a too big a problem for the country to resolve on its own.
“The key issue all the time for the Government is to ensure that we do not have a collapse of the banking sector,” he says.
The euro zone finance ministers will conduct an emergency conference call Sunday evening to consider the Irish finance minister’s declaration.
According to The Irish Times, things are now moving quickly, and some believe the European authorities may seek to finalize a decision before the markets opens on Monday morning.
Predict Dramatic IMF Reform
In an interview with the broadcaster RTÉ’ earlier this week, Fine Gael finance spokesman Michael Noonan, said that the IMF is planning a “fundamental restructuring of expenditure.”
Fine Gael is Ireland’s second largest political party, member of the European People’s Party – European Democrats Group and with representatives in the EU parliament.
The International Monetary Fund want “fundamental restructuring of expenditure and that’s where they’ll dictate, rather than on the specifics of the cuts”, the Fine Gael finance spokesman says.
“It’s not like slicing a salami or cutting the end off a cucumber,” Noonan says, adding that the IMF “wouldn’t probably specify a cut in the minimum wage but they’d say you have to get your labour market working properly.”
“You have to do like they’re doing in the UK and ensure that work is always more valuable than welfare. And by setting the headlines and by indicating serious expenditure restructuring in a certain area the Government implementing has very few options.”
He believe a similar approach will be chosen to reform the public service sector.
The IMF had no interest in “taking a few civil servants out” here and there. “They’ll be looking for the dropping of programmes and a totally new way of delivering services to the public which will cost less with fewer people,” he says.
Mr. Noonan also predicated a “very dramatic” announcement shortly by the IMF, based on the way they operated in other countries.
He believe the first line of intervention by the IMF and other EU institutions would be the banking system rather than the government’s four-year budgetary plan and restructuring, “which could be done very quickly,” and will be dealt with before anything else, The Irish Times writes.
He suggest the IMF might follow the “good bank/bad bank” formula used in the US where the good bank traded and took deposits and bad bank took the liabilities.
“It also took the creditors who had lent them money with senior debt and they had to work out their situation over years to get what they could out of it,” Noonan points out.
Last week Michael Noonan made the following statement in the Irish Dãli (parliament/House of Representatives):
Related by The Swapper:
- Ireland Applies For Bailout – IMF Plans Dramatic Spending Cuts
- Ireland: “We Have Surrendered Our Sovereignty”
- Bailing Out Ireland – The Inside Story
- Allied Irish Bank suffers massive withdrawals (guardian.co.uk)
- IMF auditors begin examining Ireland’s books (telegraph.co.uk)