BRUSSELS (MNI) – The Irish government should outline a clearer and
more detailed fiscal path and consolidate the country’s budget deficit
at a faster pace, European Central Bank Governing Council member and
head of the Irish central bank, Patrick Honohan, said on Monday.
“The government has kept to what it intended,” last year and this
year, Honohan said. But “it certainly has to look beyond 2011, and look
to the dynamic path,” he cautioned.
“This does mean a certain amount of reprogramming,” he said. “I
think the markets will find that reprogramming convincing,”
In recent weeks, markets have speculated that Ireland wouldn’t be
able to repay its debts and manage its rather burdensome banking sector
problems. Irish bond spreads widened sharply last week, as investors
speculated that Ireland may need to tap the European Financial Stability
Facility. The spreads continued that trend this morning, hitting a new
record high of +405 basis points against the benchmark German Bund.
The government is working to reduce its budget deficit — currently
around 12% of GDP, not including the banking sector costs — to below
the EU’s 3% limit by 2014.
Last week finance minister Brian Lenihan said that the government
may need to make deeper cuts than the E3 billion already outlined for
next year.
Asked if he agreed with that sentiment, Honohan said he thought
that some “reprogramming” of the budget was needed “in light of the
circumstances.”
“Some explicit reprogramming of the budgetary profile for the
coming years is clearly necessary soon if debt dynamics are to be
convincingly convergent,” he said.
“My overarching goal is to ensure that the government’s funding
costs are not damaged by a market perception that the government might
not be going to deliver what it is going to deliver,” Honohan added.
“That means going into detail [in the budget document], not just
broad magnitudes,” Honohan added.
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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