Announcement of joint EU - IMF Programme for Ireland - Irish Gov Statement

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The Government today agreed in principle to the provision of €85 billion of financial support to Ireland by Member States of the European Union through the European Financial Stability Fund (EFSF) and the European Financial Stability Mechanism; bilateral loans from the UK, Sweden and Denmark; and the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) on the basis of specified conditions.

The State’s contribution to the €85 billion facility will be €17½ billion, which will come from the National Pension Reserve Fund (NPRF) and other domestic cash resources. This means that the extent of the external assistance will be reduced to €67½ billion.

The purpose of the external financial support is to return our economy to sustainable growth and to ensure that we have a properly functioning healthy banking system.

The external support will be broken down as follows: €22½ billion from the European Financial Stability Mechanism (EFSM); €22½ billion from the International Monetary Fund (IMF); and €22½ billion from the European Financial Stability Fund (EFSF) and bilateral loans. The bilateral loans will be subject to the same conditionality as provided by the programme.

The facility will include up to €35 billion to support the banking system; €10 billion for the immediate recapitalisation and the remaining €25 billion will be provided on a contingency basis. Up to €50 billion to cover the financing of the State. The funds in the facility will be drawn down as necessary, although the amount will depend on the capital requirements of the financial system and NTMA bond issuances during the programme period.

If drawn down in total today, the combined annual average interest rate would be of the order of 5.8% per annum. The rate will vary according to the timing of the drawdown and market conditions.

The assistance of our EU partners and the IMF has been required because of the present high yields on Irish bonds, which have curtailed the State’s ability to borrow. Without this external support, the State would not be able to raise the funds required to pay for key public services for our citizens and to provide a functioning banking system to support economic activity. This support is also needed to safeguard financial stability in the euro area and the EU as a whole.

Programme for Support

The Programme for Support has been agreed with the EU Commission and the International Monetary Fund, in liaison with the European Central Bank. The Programme builds on the bank rescue policies that have been implemented by the Irish Government over the past two and a half years and on the recently announced National Recovery Plan. Details of the measures are set out in the accompanying Notes for Editors.

The Programme lays out a detailed timetable for the implementation of the measures contained in the National Recovery Plan.

The conditions governing the Programme will be set out in the Memorandum of Understanding and the Government will work closely with the various bodies to ensure that these conditions are met. The funding will be provided in quarterly tranches on the achievement of agreed quarterly targets.

The Programme has two parts – the first part deals with bank restructuring and reorganisation and the second part deals with fiscal policy and structural reform. The requirement for quarterly progress reports covers both parts of the programme. When the documentation on the Programme is finalised, it will be laid before the Houses of the Oireachtas.

Bank Restructuring and Reorganisation

The Programme for the Recovery of the Banking System will be an intensification of the measures already adopted by the Government. The programme provides for a fundamental downsizing and reorganisation of the banking sector so it is proportionate to the size of the economy. It will be capitalised to the highest international standards, and in a position to return to normal market sources of funding.

Fiscal Policy and Structural Reform

The Ecofin has acknowledged the EU Commission’s analysis that a further year may be required to achieve the 3% deficit target. This analysis is based on a more cautious growth outlook in 2011 and 2012 and the need to service the cost of additional bank recapitalisations envisaged under the programme. The Council has today extended the time frame by 1 year to 2015.

The Programme endorses the Irish Government’s budgetary adjustment Plan of €15 billion over the next four years, and the commitment for a substantial €6 billion frontloading of this plan in 2011. The details of the Programme closely reflects the key objectives set out in the National Recovery Plan published last week. The adjustment will be made up of €10 billion in expenditure savings and €5 billion in taxes.

The Programme endorses the structural reforms contained in the Plan which will underpin a return to sustainable economic growth over the coming years.

The Government welcomes the support shown to Ireland by our Eurozone partners and in particular by the United Kingdom, Sweden and Denmark who have expressed their willingness to offer bilateral assistance. The Government also welcomes the assistance of the IMF.

As part of the Programme, Ireland will discontinue its financial assistance to the Loan Facility to Greece. This commitment would have amounted to approximately €1 billion up to the period to mid-2013.
 


He3

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Will the government finally resign now?

We learn our fate from Juncker, along with his jocose remarks about rushing for his plane.

The government of Ireland could not even get it together to release the 'agreed' statement first.
 
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Holy Cow

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28th of November should now be called National Traitor Day, in memory of what FF did to our country.
 

Dan Breen

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Great Solidarity shown by our Europeen Cousins, they must be loving this. Any further information on the interest breakdown from each loaning group.
 
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This is just crazy, i bet that prize git even agreed to pay interest on our own contribution.
 

Dan Breen

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Dobson doing his best to spin it, does not seem bothered about pension reserve fund gone.
 

limericklady

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What happens to our pension holders now? Do they get paid out of Social Welfare or not get paid at all?
 

budgeybudge

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I'm hearing on CNN it's going to be 113 billion euro bailout. Makes me sad to see our country on it's knees.
 

j26

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No sign of our shower yet. We're being told what's happening by a crowd of Eurocrats.

Bastards won't even face us.
 
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Notes for Editors – Programme Measures​

Taxation
  • Lowering of personal income tax bands and credits or equivalent measures
  • A reduction in pension tax relief and pension related deductions
  • A reduction in general tax expenditures
  • Excise and other tax increases
  • A reduction in private pension tax reliefs
  • A reduction in general tax expenditures
  • Site Valuation Tax to fund local services
  • A reform of capital gains tax and acquisitions tax
  • An increase in the carbon tax

Programme Expenditure
  • Savings in Social Protection expenditure through enhanced control measures, structural reform measures, a fall in the live register and if necessary, further rate reductions.
  • Increase the state pension age to 66 years in 2014, 67 in 2021 and 68 in 2028.
  • Nominal value of State pension will not be increased over the period of the plan.

Public Service Costs

Reduction of public service costs through a reduction in numbers and reform of work practices as agreed in the Croke Park Agreement.
  • A reduction of existing public service pensions on a progressive basis averaging over 4% will be introduced.
  • New public service entrants will also see a 10% pay reduction.

  • · Reform of Pension entitlements for new entrants to the public service
  • · including a review of accelerated retirement for certain categories of public servants and an indexation of pensions to consumer prices.

1 Pensions will be based on career average earnings.

2 New entrants' retirement age will also be linked to the state pension retirement age.​

Other

  • Other programme expenditure and reductions in public capital investment

Structural fiscal reforms

  • a Fiscal Responsibility Law will be introduced including a medium-term expenditure framework with binding multi-annual ceilings on expenditure in each area
  • Additional unplanned revenues must be allocated to debt reduction.
  • The government will establish a budgetary advisory council to provide an independent assessment of the Government’s budgetary position and forecasts.
  • the voluntary 15 day rule for prompt payments is extended to the health service executive, local authorities and state agencies
  • measures to be put in place to cap the contribution of the local government sector to general government borrowing at an acceptable level.
 

Edo

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Jesus

Who did the negotiations - all the cards that we could play including the nuclear option and this is the best we could do??

Christ - we need a GE and a total clearout of the entire senior civil servant corp immediately after it.
 

vanla sighs

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When they say the interest rate can "vary" what exactly do they mean? So it is possible the interest we could be paying would be over 6%? Is this the same as with Greece, or do Greece have a set 5%? Why would we be charged a higher rate than Greece?

In a way it doesn't matter what the % is, in the end we simply won't be able to pay it imho.
 

Wjc271

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Traitors!! Lenihan and Cowen more interested in protecting Euro and bank bond holders than in looking after citizens of state!!
 

Indiansign

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So the average interest rate on 85bn is 5.8%. Given that 17.5bn of this amount is our own money and therefore interest free, doesn't that mean that the rate on the rest is significantly higher than 5.8%
 

Watcher2

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Great Solidarity shown by our Europeen Cousins, they must be loving this. Any further information on the interest breakdown from each loaning group.
Yes, that would be interesting. The musings so far are that the 'big bad' IMF wanted to charge less than 'our friends' in Europe.
 

Jack Pott

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ATotal screw job; The country is now 100% under the control of the EU/IMF a complete sell out by the worst administration in the history of the state, we have nothing left only a generation of servitude and where are the opposition? Sitting idly by; A sad day for Ireland
 
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Structural reforms in the Programme​

Labour market adjustment

Minimum wage:


  • [*]Reduce national minimum wage by €1.00 per hour to foster job creation for categories at higher risk of unemployment and to prevent distortions associated with sectoral minimum wages
    [*]Enlarge the scope for the "inability to pay clause"​
  • An independent review of the Registered Employment Agreements and Employment Regulation Orders. Terms of Reference to be agreed with European Commission Services.
  • Reform of the unemployment benefit system to incentivise early exit from unemployment.
  • Steps to tackle unemployment and poverty traps including reducing replacement rates for individuals receiving more than one type of benefit (including housing allowance).
  • Streamline administration of unemployment benefits, social assistance and active labour market policies, to reduce the overlapping of competencies among different departments;
  • Enhanced conditionality on work and training availability;
  • Reform of activation policies:
    [*]improved job profiling and increased engagement;
    [*]a more effective monitoring of jobseekers' activities with regular evidence-based reports;
    [*]the application of sanction mechanisms for beneficiaries not complying with job-search conditionality and recommendations for participation in labour market programmes​
Review of the personal debt regime:

  • New legislation to be prepared which will balance the interests of both creditors and debtors.

Competition

Removal of restrictions to competition in sheltered sectors including:

Legal profession:

  • establish an independent regulator;
  • implement the recommendations of the Legal Costs Working Group and outstanding Competition Authority recommendations.

Medical Profession:

  • eliminate restrictions on the number of GPs qualifying, remove restrictions on GPs wishing to treat public patients and restrictions on advertising.

Pharmacy Profession:

  • ensure the recent elimination of the 50% mark-up paid for medicines under the State's Drugs Payments Scheme is enforced.

Enhanced competition in open markets

  • empower judges to impose fines and other sanctions in competition cases in order to generate more credible deterrence
  • require the competition authorities to list restrictions in competition law which exclude certain sectors from its scope and to identify processes to address them.
  • Examination of the impact of eliminating the cap on the size of retail premises
 


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