). Time for the government to 'fess up ...http://www.irishtimes.com/newspaper/bre ... king1.html
Honohan expects State to take large EU/IMF loan
Central Bank governor Patrick Honohan has said he expected the Government will have to accept a multibillion euro loan as EU and IMF negotiators arrive in Dublin today for talks.
The Government is expected to battle to prevent any increase in the €6 billion adjustment proposed for the 2011 budget and the €15 billion target in the four-year plan during today’s discussions.
Speaking this morning, Prof Honohan said he expected the Government to accept a loan of tens of billions of euro. "It's my expectation that that is what is definitely likely to happen. That's why the large technical teams are sitting down discussing these matters," he told RTÉ's Morning Ireland.
"I think this is the way forward. Market conditions have not allowed us to go ahead without seeking the support of our international collaborators," he said.
"I don't see it as something that is really worrisome or should lead to a huge change of direction because as we know, the fiscal discussions about €6 billion cuts, all of that is part and parcel of what an IMF team would ask for, would suggest if they came in, in the absence of any such discussions," he said."I'm not saying they'll rubberstamp, but I think that they will not find all that much to disagree with."
Mr Honohan said he expected the loan, which was not a bailout as it has to be paid back, would be used to show Ireland had “sufficient firepower to deal with any concerns of the markets”. He also understood the money would be borrowed at a rate in the region of 5 per cent.
Also speaking this morning, Minister for Communications Eamon Ryan said: “We may need help from our international European colleagues . . . I don’t have a problem with that, and I don't have a problem recognising the scale of the problem . . . what we need to do is get the terms and conditions right."
Mr Ryan also said the Government would publish its four-year fiscal plan around the middle of next week and added that teams from the IMF, the ECB and the EU would see that the position of the Irish banks were strong. "Our banks are solid and I believe that that will be shown to be the case."
The Minister conceded it was a bad day for Ireland. "Without doubt, no one would want to be in this space, but we just have to work our way out of it," he said on Morning Ireland.
As pressure builds from Europe for an immediate application for external aid, Dublin is campaigning to minimise any funding it draws down in a bid to ensure the terms are not too onerous. Negotiators on the other side are keen to determine the exact scale of the funding requirement for the banks.
Although the Government sought at first to draw a distinction between any emergency aid for the banks and for the State, there is a reluctant acceptance now that any funding for the banks will have to be drawn by the State. The Government will try to limit the size of the drawdown and the scale of outside involvement in wider economic management.
French economy minister Christine Lagarde this morning said the euro zone was not at risk of breaking up in spite of jitters over the creditworthiness of its member Ireland.
"No, there is no risk of [the EU] breaking up," she said on France Inter radio. Ms Lagarde added Britain could participate in aid for Ireland despite not being a member of the euro zone, possibly in the form of a bilateral loan.
In the Dáil yesterday, Taoiseach Brian Cowen said the Government will “seek to protect our essential national interests and to ensure that the outcome is such that the country’s sovereignty and sovereign debt is not unduly imposed upon with a burden it cannot bear”.
A senior source said last night the Government believes any agreement to accept aid at this point would weaken its hand as the precise terms of an aid plan are being hammered out in the coming days. A further priority is to preserve the 12.5 per cent corporate tax rate, which is a central element of the four-year plan.
But pressure on that front is already emerging, even though Minister for Finance Brian Lenihan insists no change is in prospect. His Austrian counterpart Josef Proell said yesterday “there needs to be talks with the Government about this issue” whenever external aid takes effect.
