Eighth Troika Review October 2012

[PaddyJoe]

Completed today. The documentation will be on the DOF site later this afternoon.
From the press release:

“We are pleased to confirm Ireland has successfully completed the 8th Review Mission and we continue to meet all of our targets. To date over 160 commitments have been fulfilled on time and we have drawn down some 80% of the funding. The Government remains fully committed to restoring order to the public finances, to building on and broadening the economic recovery and positioning Ireland to continue our return to the markets

Delivered Actions
Key actions completed in the last quarterly reviews (Q3 2012) were:
The publication of legislation to establish a statutory credit risk register
The publication of the Personal Insolvency Bill
The publication of the General Scheme of the Credit Union Bill
Regulations for the Credit Institutions Resolution Fund Levy
The publication of legislation to anchor the already operational multi-annual expenditure limits
The publication of the Fiscal Responsibility Bill
The establishment of a programme to facilitate access by distressed borrowers to professional financial advisory services, funded by banks.
The coming into force of the Industrial Relations Act 2012

http://www.finance.gov.ie/viewdoc.asp?DocID=7408

[PaddyJoe]

Troika statement:
http://www.ecb.int/press/pr/date/201...121025.en.html

[PaddyJoe]

Interesting stuff from the conference call with Craig Beaumount of the IMF yesterday(Thursday)
First, how the IMF screwed up on the fiscal multiplier but isn't really going to admit it. Will do better in future of course.

Looking back there is no strong evidence that multiplier was underestimated in the case of Ireland. In the box in the recent World Economic Outlook that prompted this discussion, it was anticipated that there would be a large fiscal consolidation in 2010-2011 in Ireland. But there was no error in the projection for average growth in that period in the case of Ireland. In 2011, the first year of the EU-IMF program, growth of 1.4 percent actually exceeded the original program projection of 0.9 percent. This year growth is notably lower at only half a percent as I mentioned, compared with the original program projection of 1.9 percent. But much has changed externally since that projection was made back in December 2010. Domestically it's difficult to separate out the impact of other factors including the large uncertainty facing households and firms who are often highly indebted, and the low level of lending to which they have had access, from the impact of fiscal consolidation.
So at this time we consider the impact of fiscal adjustment has been properly allowed for in the Irish program, but going forward we will update our analysis in this and other issues as we do at each review.

http://www.imf.org/external/np/tr/2012/tr102512.htm

[PaddyJoe]

Second, the IMF is well aware that it runs the risk of being embroiled in European bailouts ad infinitum and would dearly love to extract itself from Ireland and Portugal when the current bailout programmes come to an end.
The IMF would be delighted to see Irish bank debt moved to the ESM:

On the issue of the bank recapitalization debts, we outlined in the previous staff report how a potential ESM direct bank recapitalization could benefit Ireland. We assumed for illustrative purposes that €24 billion--which is the amount of the bank recapitalization under the program--could be instead funded by the ESM. This would immediately reduce Ireland's debt by about 14 or 15 percent of GDP, which would significantly reinforce its ability to access market funding on reasonable terms.

[PaddyJoe]

No restructuring of the current deal on the cards and no extension of the fiscal adjustment over a longer period.
If ESM recapitalization was arranged it would "benefit both Ireland's debt sustainability and it would also strengthen the banks"
No discussions so far about an exit from the programme:

No, at this stage we haven't begun discussions about that. At some stage there would be a need as we get closer to the time, we would need to think about the whole exit strategy, but at this stage we're very much focused on the budget for 2013 and the financial and structural reforms to restart and revive growth. So, we haven't begun those discussions.

I thought Noonan said that this was discussed with the Troika?
ESM bank bail out options for Ireland?

MR. BEAUMONT: Well, one option would be simply for the ESM to purchase with cash the equity stakes in the banks, and for the Irish authorities to then to use the cash to reduce debt. Another option would be a debt-equity swap where the ESM would acquire equity in the banks and simultaneously there would be a corresponding reduction in Ireland's EFSF debt. There's no decision on the exact modalities but those are some options.

http://www.imf.org/external/np/tr/2012/tr102512.htm