Irish Prime Minister Enda Kenny gives a speech about the country’s economy, housing market and the terms of its loan from the European Union and International Monetary Fund.
Bloomberg Dublin bureau chief Dara Doyle moderates a question and answer session following the speech yesterday at Bloomberg’s European headquarters in London. (Source: Bloomberg)
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
ENDA KENNY, PRIME MINISTER OF IRELAND: I’m glad to be here in Bloomberg and have this opportunity to say a few words to you about our situation. I want to give you a flavor of what the new Irish government, Irish, how we intend to continue our progress of acting decisively to help engineer a recovery in our country as quickly as possible.
The purpose of my visit to London today is threefold. Firstly, earlier this morning I met with representatives of the Irish community in Britain. Obviously you would be aware of the very long traditional ties between Ireland and Britain in the context of business, and work and employment and trade, social activities, over very many years.
And I wanted on my first official visit to London as Taoiseach to recognize the contribution that local authorities make here, that the British government make here and that the organizations which are funded by the Irish state through our diplomat services make in respect of our citizens who live here in Britain. That contribution is oftentimes not recognized as wisely as it should be, both in Britain and at home in Ireland and it was important for me as somebody who has a deep understanding of this and the long history associated with it that I should do that on one of my first official engagements this morning.
Secondly, I want to communicate widely through the media and through this particular event with key opinion formers and the broader business community what the new government is actually doing to address Ireland’s economic challenge. So I am grateful to Bloomberg for hosting us today and to all of you for coming along to both listen and to participate. I had some interaction with Bloomberg in Washington when I was there recently for the St. Patrick’s Day festivities.
And, finally, later this afternoon I am going down to Downing Street to meet with Prime Minister Cameron and we will discuss a range of issues there of mutual interest between Ireland and Britain. We met at a number of recent European Council meetings, but this afternoon’s meeting will focus primarily on the unique bilateral relationship between our two countries, Britain and Ireland. And that relationship is one of mutual respect, one of trust and one of opportunity. It is one of friendship and support, including financial support in these more difficult times.
As Taoiseach and as leader of the Irish people it is a friendship that I value, that I prioritize and that I intend to develop. This friendship has been achieved through decades of working together towards the goal of peace in Northern Ireland.
Many of you, if you have taken any passing interest in that complex problem over 40 years, will understand and appreciate the degree to which all parties and politicians of all parties have put their minds and their intent on bringing about a lasting solution to this which is now in place and being implemented through the Good Friday agreement. As we speak here the election campaign is underway for election to the Northern Ireland Assembly.
That Assembly has just completed the first full term of power sharing government ever in Northern Ireland after decades, indeed centuries of division and violence. So that’s a powerful symbol of what Democratic politics can achieve when everybody actually applies their minds to it. It demonstrates to us all that in politics there is no problem, political, economic or social that cannot be resolved.
The historic process of peace and reconciliation will be underscored, as John has pointed out, by the historic visit next month of Queen Elizabeth to Ireland, the first such visit of a reigning monarch in 100 years and since independence. It is an event of truly historic importance and it will demonstrate how both nations have come to terms with a difficult past, but it is also a visit that looks forward and shows how two neighboring islands intend to cooperate together for an even stronger future.
You will also be aware that the visit of the Queen will be followed a few days later by a visit by the President of the United States, President Obama. That visit will also reflect the unique and the historic ties that exist between Ireland and the United States and that visit will reflect the unique and historic ties that exist in so many ways over so many centuries.
And taken together I believe that these two events in this place of one week will provide a springboard for our people to look forward with hope and with confidence to a brighter future. I also believe that they show that whatever else people say about Ireland the Irish we are no ordinary country and we are no ordinary people.
We have seen dark days before, very dark days indeed. We have dealt with and overcome adversity in the past. We will do so again with the creativity and the imagination of our people alike to the help of our friends and partners in Britain, in Europe and in the wider world.
It’s my belief that we will emerge from our current challenges as stronger than before. And to lead that comeback is the fundamental challenge of the government that I now lead. And I have no illusions, none, about the scale of the challenge that we face.
As John pointed out, no government in the history of our state has faced the scale of economic challenge that our government now faces. Well, equally so, no government in the history of our state has been given the strength of democratic mandate that the government I lead now has.
I know that this audience is well informed on these matters and you will have your own views on Ireland’s prospects for economic recovery, so I am not here to promise the unachievable or to offer quick and easy solutions when there are none. Nor am I here to ask skeptics to change their minds overnight. I am here to say a few words about how I believe that Ireland will actually recover.
And all I ask of this audience with a wide and diverse set of opinions is to listen carefully and to think maybe to think again about the future of our country. For the first time in several years there is a real debate about Ireland’s genuine prospects for export-led recovery and I invite you to debate with us and to participate in that debate in the months ahead.
And as we debate that future I am reminded of the old joke that equity markets have predicted ten out of the last five recessions. And I am also told that according to IMF research the bond markets, the bond markets have managed to predict 36 of the last seven defaults. Think about that. We have predicted 36 of the last seven. Unfortunately, I didn’t bring the statistics for politicians predicting a better future. That might be the other way.
Ultimately, I recognize of course that economic outcomes will speak for themselves. I know that we will be judged by our results, not our rhetoric, and it results and not rhetoric that actually interest me.
I lead a government, as I said, with an overwhelming mandate from the people to do what is necessary, to do what is necessary, to bring about economic recovery and to sort out our own problems. Our people are very pragmatic. They want to know what the scale of the problem is. They want to know the range of options and solutions that have been put forward and they want clarity, and decisiveness and leadership from their government to end the days of uncertainty and confusion and bring about clarity of decision so that people can say I can now plan for the future and for the future of our children.
The mandate I’ve been given, the largest in the history of the state, gives my government the authority to make the changes that count. And that gives us the opportunity to give clear leadership and to take hard and tough decisions. And we will make those both with courage and with fairness.
The task that I set for the new government which I lead is to carefully formulate and then to implement decisively the policies that are required to address all of our problems. Now after five weeks in office, having inherited a particular legacy and having looked at the scale of that we have already made some significant progress.
We have commenced an intensive engagement with all our international partners and that includes discussions I have had already with my fellow members of the European Council on a number of occasions, as well as with the Troika of the EU, the ECB and the IMF. Among the leaders that I have had discussions with and talked with already have been Chancellor Merkel, President Sarkozy, Prime Minister Cameron, the Presidents of the European Council, the European Commission, the European Central Bank, President Obama and US Treasury Secretary Geithner.
My ministerial colleagues have been engaged in intensive contacts with their counterparts in the finance ministries and the foreign ministries of Europe. We have made major decisions on the future of our banking system in response to the most severe and the most transparent stress tests carried out with the assistance of highly reputable international experts.
We have committed in our program for government to meet the fiscal consolidation targets that have been agreed in the EUR, IMF program and we are on target to do that. In our first five weeks in office we have initiated a far reaching, comprehensive spending review that will be completed in September and that will form a solid base for deficit reduction in the years ahead.
For those of you who might not appreciate what’s involved here, for years in our country the Ministry for Finance did the bilateral arrangements with all of the different ministries, money allocated by vote of Cabinet to those departments, but there was never the capacity to actually determine how effectively that money was being spent, what value was achieved, being achieved for that money, of where duplication or waste occurred. We have split that department into two separate departments, one which is the Department of Finance for that bigger picture, but the second in respect of senior ministry dealing with the area of public service reform and public expenditure.
And this comprehensive review will go into every element of every vote of every department to see how that money is being spent, how it’s being used, where that program should be abolished, where the program should be limited or where the program should be enhanced. And that process will be completed by September, which will allow for the first time a really true and accurate picture of the Irish internal budgetary situation as we prepare a program for the 2012 budget which will be introduced later in the year.
Last week we concluded successfully, I might add, the first review of the EU’s ECB, IMF Troika team in Dublin. The Troika agreed that Ireland is fully compliant in respect of the conditionality set out on the EU, IMF program to the end of the first quarter.
It expressed the strong support for the actions adopted by the new government in relation to bank restructuring and bank recapitalization. We agreed to change some aspects of the program that were concluded with the previous government and to replace those with proposals that we included in our own new program for our government. These include changes in the minimum wage with a compensatory adjustment on employers’ social insurance and a new fiscally neutral jobs initiative which will be announced in the Irish Parliament in May.
There was also an important agreement that a transfer of loans with a value below EUR20 million to the National Management Agency will not proceed. Instead, the banks will manage down their exposure to these loans themselves in line with the government’s new policy.
While our problems lie predominantly in the world of banking and economics, I also believe that part of the solution lies in the world of politics and political reform. The new government program actually contains the most far reaching political reforms since independence. These reforms will be vigorously and swiftly implemented.
I can speak with some authority and experience in this regard as I happen to be the longest serving member of the Irish Parliament. In that sense I know the perception and the frustration that citizens have when they see a never ending series of circles about how government does its business in its broadest sense and we intend to change that.
We have taken clear action to reduce pay and perks for politicians and to change how we appoint persons to serve on state boards and in the senior public service. As you would be aware, there are already have been significant changes in the leadership of our central bank and financial regulator, as well as in the management of the banks, more to follow.
We have reorganized the machinery of government to give the highest priority to public service reform and to job creation, while we are bringing new methods and new expertise in key areas such as banking policy to give an injection of competence and managerial experience from the outside to the public service. We are also planning a series of important national referenda to modernize our Constitution. It is my intention that the pace and the quality of that reform will be maintained and indeed enhanced over the next number of months.
I believe that just as Ireland had seen the worst of many aspects of the global economic crisis we can now show the way to new ways of doing business that become a model for other countries for the future. Of course, I fully acknowledge that there is a long and difficult road ahead to get to that destination.
Politics was never meant to be a bed of roses. The challenge facing me, and my government and the government I lead are unappreciated in that regard. There are questions we have to answer on that route about our banking system, about our fiscal sustainability and about our prospects for economic growth.
I would like to offer a few observations on these issue if I may, which are the key dimensions of our economic equation. On banking the key objective for my government is to strengthen fiscal sustainability by separating bank risk from that of the sovereign.
Clearly this will only be achieved by returning the banking system to health. The recent capital and liquidity assessment exercises, the so-called PCAR and PLAR exercises by the Irish Central Bank have achieved considerable attention.
They have been extremely thorough and transparent. The input of the respected international consultants, including Blackrock, ensured a really high degree of external valuation.
The process was also subject to close scrutiny by the IMF, by the European Commission and by the ECB. It has set the bar very high indeed in respect to the standards now expected of both Irish and foreign banks by Irish regulators.
A radical reorganization of the banking sector in Ireland is now underway. The banks will be required to unwind EUR77 billion of non-core assets so that they refocus on the core business of supporting real economic activity in Ireland and in Northern Ireland.
There will be major consolidation within the sector. We will move to two pillar banks of roughly equal size, along with competition from foreign banks already in the market. The analysis suggests that a capital injection of EUR24 billion is required. This figure was calculated to absorb shocks of exceptionally higher levels to the banking system over the next three years.
It should be noted that EUR5.3 billion of this represents a buffer over and above what was required to meet the requirements of the stress tests. Moreover, EUR3 billion of this figure will represent contingent capital.
We also expect that the institutions will raise a not insignificant proportion of this capital by themselves. Accordingly, therefore as losses emerge over the next few years’ capital level will remain high by international standards, even under a distressed highly and likely scenario.
The reaction to the stress tests from the markets and others has been very encouraging. It reinforces our belief that the tests were extremely credible and robust. The EUR24 billion required by the banks for capital purposes is within the funding element available for this purpose from the EU, IMF program.
We will also seek direct contributions by requiring further significant contributions from subordinated debt holders, by the sale of assets to generate capital, and where possible, by seeking private sector investors. We will make our banks smaller, more focused, better funded and better capitalized. We will transform our banking system to effectively serve our economy and to contribute to full recovery.
On the public finances there are some positive signs in relation to Ireland’s fiscal position, although there are undoubtedly, undoubtedly serious challenges as well if the economy does not perform as well we expect. 2010 was a year of stabilization. The overall Exchequer position was in line with the Department of Finance estimates set in December 29 with tax revenues finishing the year above target.
The underlying general of the government deficit, that is the deficit excluding the capital support committed to some of our financial institutions, is also expected to have met the target set in December 2009. The Exchequer returns of revenue and spending for the first quarter of this year, 2011, were also broadly consistent with expectations with tax revenues, despite being a little behind target, up almost four percent in the first quarter of 2010.
In the past two weeks you may have noticed there have a number of announcements from the various credit rating agencies regarding Ireland’s sovereign rating. The news has been mixed, but it is important to state that all of our ratings remain within the investment grade band.
Our external partners have acknowledged that Ireland is making, as they say, good progress in overcoming the crisis. We have reached our targets up to the end of March by a comfortable margin, as they point out. This reflects our seriousness, our absolute seriousness in doing what is necessary.
Our balance of payments, current account, is expected to move into surplus this year. This is an important indicator of the long-term sustainability of the Irish economy. We have recovered from a higher level of debt interest burden in the past, achieving a dramatic turnaround through fiscal discipline and high levels of growth. This can and will be achieved again.
As a member of a monetary union we also rely on the support and the solidarity of other members and we are grateful for that. And we will continue to engage with our European partners to ensure that the program delivers the outcome, which is in all our interests, Ireland’s interests and Europe’s interests.
I am confident that Ireland will meet our obligations under the program. We will also continue to make the strong case for a reduction in the interest rate payable for funds under the program. It should not be dependent on Ireland making a concession that will threaten the economy’s growth potential. That would be awfully self-defeating.
That is why we simply could not accept any adjustment in the Irish corporation tax rate as it would damage the prospects for our recovery. That is not to say that the new government will not take tough or unpopular decisions. We fully recognize that confidence and recovery depend upon stabilizing the public finances.
So the new government is determined to continue the program of fiscal consolidation, including by legislating for an increase in the pension age, a reduction in the size of the public workforce by 12 percent from its peak, and establishing a new fiscal council and enacting groundbreaking fiscal responsibility legislation. By 2014 Ireland will have delivered a financial consolidation equivalent to 20 percent, 20 percent of GDP, most of which has already been secured.
The Irish people are determined to pick ourselves up, to pay our own way and to contribute to the future progress of the European Union. And I believe our partners will continue to support us and work with us to ensure that the program facilitates an early return to the markets. We require greater flexibility, not more money, to enable us to do so.
On economic growth the underlying reason for confidence is the medium-term growth potential of the Irish economy. As you know, Ireland is one of the world’s most open economies and our exports our performing very strongly.
Right now we export 80 percent of what we produce. In 2010 our exports grew by 9.5 percent. By the end of 2011 we expect our exports to exceed our record pre-recession level. This shows the economy rebalancing towards exports.
We also continue to attract significant levels of inward investment, despite the turbulent global economy in which, according to the OECD, foreign direct investment declined, declined by eight percent. Our inward investment agency, the Industrial Development Authority of Ireland, secured 126 investments in 2010 and its’ client companies created almost 11,000 new jobs. From that perspective there has never been a better time to invest in Ireland.
Intel, Google, eBay, Facebook, Citigroup, Boston Scientific are just some of the world-class global companies that expanded operations or increased their R&D in Ireland in the last 12 months. These companies know our country and they see a bright future there.
We remain, according to independent international studies, fourth in the world for availability of skilled labor, fourth for being open to new ideas, sixth for labor productivity and seventh for the flexibility and the adaptability of our people. We will maintain Ireland’s 12.5 percent corporation tax, which is a longstanding and necessary part of our enterprise strategy.
One of the positive outcomes of our recent difficulties is that our cost competitiveness has improved significantly. And one of the challenges for us is to explain that in the context of where competition lies for us around the world.
Our unit labor costs have fallen significantly. The European Commission forecasts an improvement of 14 percent relative to the euro area by 2012. Consumer price inflation has been below that of the rest of the euro area since the beginning of 2009, which delivered substantial reductions in relative costs.
We are implementing structure reforms to put more downward pressure on costs. In other words, we are delivering a real exchange devaluation within the monetary union.
These cost reductions are already translating into substantial trade and employment benefits in an open business-friendly economy like Ireland now has. While all of the rating agencies have recognized the recent weaknesses evident in the Irish economy, they have also pointed to the underlying strengths in order to leave a flexible open economy and that the ongoing recovery in export growth will drive a rising trade and current accounts surplus.
The general view contained within these assessments is that the economy is stabilizing and that our long-term growth potential remains high. In this regard, the agencies all point to our social stability and strong political commitment to fiscal consolidation as being a key support to Ireland’s credit rating. The importance of those factors, especially following the recent general election decision, should never be underestimated.
Last week the Irish Central Bank projected 0.9 percent growth in 2011. And most other forecasters expect a modest return to GDP growth this year. The government will publish our own revised forecasts later this month.
The key element, therefore, of our economic recovery strategy is to develop policies that would allow job growth and sustainable enterprise to flourish. To this end, we will deliver a jobs initiative next month which will, among other things, reduce the lower rate of VAT, have the lower rate of employer social insurance contributions, enhance our labor market policies and accelerate labor-intensive capital projects.
This initiative aims to underpin domestic confidence and therefore help reduce precautionary savings which are currently at very elevated levels. Our strategy for growth is to play to our considerable strengths, while taking swift and decisive action to comprehensively address our weaknesses. We are convinced that growth is the key and that it can and will be achieved.
So, in conclusion, my key message is to you here in Bloomberg today are as follows. We are meeting our targets under the IMF, EU program of support. We are getting on top of our banking crisis. We have taken decisive action to restructure and recapitalize our banking system, which will be finished by July, at costs that are within the envelope provided for the, provided for by the IMF, EU program. The costs will also be offset by measures involving subordinated bond holders, asset sales and private finance.
We are beginning to get our public finances in order. We are working with our regional partners to make sure the program operates in a way that facilitates early return to the markets, including the level of interest rate charged. We have taken dramatic action to reduce our fiscal deficit and we will continue on this path to make the target of a three percent deficit by 2015. And nothing will deviate us from that plan.
Economic growth is the key factor in debt sustainability. We are taking early policy decisions to accelerate growth in job creation and the economy will return to growth this year.
We have made significant improvements in competitiveness, including an estimated 14 percent improvement in unit labor costs relative to the euro area by 2012. Our balance of payments current account is due to go positive this year, which is an important indication of sustainability.
We remain a magnet for foreign investment by providing a competitive business-friendly environment and a skilled, imaginative and creative workforce. We will retain our rate of corporation tax, a longstanding part of our enterprise strategy.
We are also working very hard to rebuild Ireland’s reputation, both inside the European Union and beyond, but ensuring the progress that we are making is communicated effectively and by assuring other governments of our seriousness of intent in this matter. As we speak, all of the ambassadors of the European Union are being called today to our Department of Foreign Affairs, are being spoken to by the Tanaiste or deputy, a deputy head of government in respect of the program that we adopt and what we are about.
We intend to recall all our own ambassadors from around the world, our enterprise people, our industrial development authority people to talk to them about their mission, about the program we have in mind for them and how important it is to let the word there that this new government has a different sense of priority, a different sense of commitment, a different level of seriousness in sorting out our fundamental problems at home so that we can play our part, pay our way and be responsible and central for the continued progress of the European Union and rebuild our reputation beyond the borders of the Union. To that extent I intend to travel again to the States early in May to meet with business interests, banking people and the political forces in New York.
So this is a work in progress with the emphasis on the world progress. We have proven before how a small and regional economy can grow at a fast rate over a sustained period. And we can do so again. My belief as somebody who meets people constantly, both in business and who would like to be in business, that the frustration that has been endemic in our people and our economy for quite some time has been released in part by the evidence that this government is now taking decisions that are in our country’s interests.
And I believe that when we fix the parts of our economic engine that have not been working in the way they should the fuel of confidence that we can supply to our people will bring about a resurgence of growth, a resurgence of spending capacity, a resurgence of interest in employment, in job creation, career opportunities which will be the driving force to restore Ireland’s good fortunes.
So I thank you for listening and will take whatever questions you have to ask in, over the next few minutes. Thank you very much indeed.
UNIDENTIFIED SPEAKER: Thank you very much, Taoiseach, for that comprehensive overview. So without further ado I will pass you over to Dara Doyle, our Dublin Bureau Chief, who will moderate the Q&A session.
DARA DOYLE, BLOOMBERG NEWS: Thanks very much, John. First of all, thank you to the Taoiseach for coming into the bear pit that is Bloomberg at times, much appreciate it. We have, unfortunately, not much time for questions, 13 minutes to be precise, so I am going to have some quite strict ground rules with questions, if that’s okay.
It’s one question per person and if you could state your name and the organization you are from. And what we are going to do is to include the questions in three and the Taoiseach can take them in the order they are looking first. Okay, who would like to open the opening question, the fine here? Yes, say something.
QUESTION: Hi. I’m Thomas Costrick (ph) from (inaudible) Bank. Mr. Prime Minister, your government seems to have backtracked on the minimum wage. How should we interpret this in the framework of your strategy of an export-led recovery? Thank you.
DOYLE: Okay. Second question?
EDA CARANY: (OFF-MIKE)
DOYLE: You see. It’s away from the mic (inaudible)
EDA CARANY: Eda Carany, GIG Partners. You have made reference numerous times throughout the speech about Ireland’s willingness to pay your way independently and I would to get a bit more clear about obviously in respect to the banking sector you have tiered the banks, two core banks, Anglo Irish and other banks, and what’s your sort of strategy going forward for these banks?
DOYLE: And one last question please, so the gentlemen here at the back and thank you.
DERRICK HALFPENNY: Derrick Halfpenny from the Bank of Tokyo Mitsubishi. Taoiseach, you mentioned the fact that Ireland in the past has managed to get out of economic problems like we have at the moment. Of course back then though, historical examples, we had our own currency and our own monetary policy. In that regard, does it not concern you that the financial markets are currently pricing in about 100 basis points of monetary tightening over the next 12 months, which is resulting in a very strong gain for the euro against both the pound and the dollar?
DOYLE: Okay. So, Taoiseach, that first that’s questions there, the euro, the minimum wage and banking strategies he said there.
KENNY: Well, first of all, in respect of the question with backtracking on the minimum wage, in fact it’s the other way around. Prior to the general election we agreed that we would restore the minimum wage to what it was. And the Troika last weekend agreed with that.
I met with the Troika as leader of the Party in opposition before Christmas, before the election. And we discussed a range of issues with the Troika. And while the agreement had been put together by the previous government the Troika agreed that sectors of that agreement within the overall conditions could be transposed one with the other.
And from that point of view we set out that we would restore the minimum wage to what it was. It affects two percent of our workforce. Obviously we didn’t want to have a situation where you had a free for all in terms of the labor market. And there are other issues that have already been agreed about arrangements where there are obstacles to labor employment, and to employer positions dealing with overtime, and joint labor agreements and so on that are going to be a part of a separate package which will compensate on the other hand in respect of the minimum wage.
So it’s not a case of backtracking. It’s a case of actually having agreement from the Troika in implementing what is part of our program for government.
In respect of the banking position, obviously we had six dysfunctional banks and the problem with the Irish economy, if you like, as a patient staggering along, but unable to contribute. So our government looked at this and we took a series of serious decisions about it. So we are going to have two core pillar banks, the Bank of Ireland and Allied Irish Bank.
Anglo Irish Bank is a bank being wound down and obviously has been central to the catastrophe that affected so many people, as a consequence of the Irish economic crisis. So our two pillar banks are going to be the Bank of Ireland and AIB, together with the EBS. And we expect that the deleveraging that will take place now will provide a core element of at least EUR10 billion in credit for lending over each of the next three years. And these banks have been required now by law this position to core and non-core elements, core is with Ireland, to Northern Ireland, and non-core is beyond that.
So in addition to that, in respect to the jobs initiative which we will introduce in May, there will be an insurance, a credit insurance team drafted there because one of the problems for the real economy and real business is that they can’t get credit from the banks. Overdrafts have been cut and people who wanted to change direction or diversify simply haven’t been able to get credit.
So where you have talk of credit being lent it didn’t actually apply. So from that point of view an element of our jobs initiative will be in respect of a credit insurance scheme which will lessen the risk for the banks, provide greater flexibility, and therefore allow for that sense of confidence to come back into the market, which we believe our people have always been really practical about and interested in. And I expect a strong resurgence there.
I might say that in visiting loads of firms over the last six weeks before the election many of them said, you know, we had 50 employed or 100 employed. We are now less than half that or a third of it. I would like to get back again to the point where we can have that measure of confidence.
In respect of the charge in respect of the interest rates, at the meeting in Brussels of the heads of government we didn’t actually make a decision in respect of Ireland in that because the reason was that I spoke to President Van Rompuy the difficult stress tests were not completed in respect of Ireland and we agreed that that would be better left to the ministers of finance who have carried that on. That wasn’t dealt with in Budapest, which was an informal meeting. The Portuguese government have applied for assistance under the bailout fund. IMF officials are there at the moment.
But it did - the meeting in Brussels did say that it would be - it was agreed that countries participating in the bailout package under the EFSF program should have their interest rates, interest rate reductions applied. Now Greece got a 100 percent, a one percent reduction, 100 basis points, but they are not in that package. And they got also an extension of the period involved there.
So interest is not due, in respect of Ireland’s case, until October, November, as we have got time now to reassure our European colleagues of how serious we are about this. The IMF have recently said that an interest rate reduction should apply in the case of Ireland. We believe that our economic growth projections will allow us to meet our requirements in this matter. And hopefully when we can bring about a reduction of interest rate and that would be to our advantage also.
DOYLE: Okay. Two more questions please, surely, period. And the gentleman here?
QUESTION: Ofanga Pickly, Reg Group (ph). Around the 70 percent of the mortgages are already in arrears now. Most of them are a variable rate. The ECB is hiking. Is that the next big challenge for the government? If so, what have you got up your sleeves to tackle that problem? Thank you.
DOYLE: Second question from some?
QUESTION: Tshock James McGrain (ph) with the London Irish Graduate Network, and my question is regarding graduates. Very recently we have noticed a huge significance, a significant increase in the mass exodus of graduates from Ireland. These are graduates that the governments have invested huge, vast sums of money in and they are very important to the development to the economy in the future. I would just like to know what the policies are for this government to retain these graduates or what policies they have to bring them back into the country. Thank you.
QUESTION: (inaudible) and BBC. We - this morning we had another round of rumor and counter rumor in the markets. FT was saying that the Greeks had started a new, renegotiating or in extending their schedule of payments, rescheduling them. This kind of rumor and counter rumor, surely that needs to - that’s not going to stop before some sort of grand bargain involving some sort of rescheduling of debt for all three countries is sorted, or the rates come cascading down to pre-recessionary levels.
KENNY: Well, obviously the question about mortgage arrears is obviously one of serious concern for us. Some people have been in the negative actually for quite some time. Others have had some difficulty in meeting their mortgage arrears and as a consequence of the latest increases others will have difficulty from here on.
Obviously a moratorium has been introduced. There are a number of issues that the Minister of Finance will present to the Irish Parliament to the Dail in the near future dealing with distressed mortgages, which is of a daily concern to so many people. It’s a serious issue for us and government are going to focus on that with a series of announcements, some of which have already been made, over the next couple of weeks.
With respect to the graduates, I was at a conference in Dublin Castle on, today’s Monday, on Friday. And one of the points being made by international experts was you ask a class of leaving certificate students in Ireland how many are going to form their own business the average response is about 20 to 25 percent, as against places in the United States where it would be 80 or 90 percent.
Well, the thing is to get a sense of, on the one hand, of the stream of education does, but on the other to have a culture that’s far stronger in the context of business. And we don’t want to see graduates having to go to Vancouver, or Seattle, or Australia or wherever unless they want to go by choice. And that’s why in the context of the comprehensive spending review we want to see that the Irish taxpayers’ gets the best impact of what it should be at.
And I don’t see any reason why we get the fundamental problems sorted out here that we can’t have real growth in the Irish economy where that level of creativity and ingenuity, which is now being exported and drifting abroad, cannot stay at home. In fact, I don’t see why many companies who have received substantial assistance from the IDA don’t continue their programs of graduate employment and graduate training, take them on.
So as part of our own jobs initiative we will free up that labor market for the graduate employment. And I might say, as you well know in an organization like Bloomberg, the next decade will see massive changes with the information in genetics, and biotech, and robotics and nanotechnology. And our colleges of technology, our universities, we need to gear up for those changes and those challenges.
I might say that the evidence from over the years is that our young people they can measure up to the scale of challenge and competition from their peers around the world. And our education system has got to redirect itself to deal with that opportunity.
So while some would obviously go because they want to go, we want to provide a situation whereby serious government decisions you create a country where people who want to stay, where it’s attractive for them to stay, where they are not taxed out of existence and where the opportunity exists to give them, give vent to their flare and their ability.
I have read the - heard Joe there, have read about the report about the Greek government renegotiating their position. Obviously there are some serious challenges here for a number of countries. We are focusing on ours and our problems, we believe, are surmountable and that’s why, that’s why the mandate given to me and the government is to sort this problem out and deal with the fundamental issues that have been around for a long time now.
I spoke to Mr. Papandreou prior to the last meeting in Brussels. He was happy at that time to have a reduction of one percent given to him and a longer period. So, and from our perspective the issues that relate to our economy and its potential to growth are surmountable. That’s where we are focused, and as I say, we want to get back to a position as quickly as possible where we can goodbye to the IMF and the EU in terms of this particular deal, and get back to the bond markets and be in charge again of our economic destiny. That’s the big challenge.
And as I say, we are not looking to get into a program. We are in a program. And the IMF and the EU are now assessing every issue that Ireland has to deal with, so within those constraints we want to give freedom to our people to grow and have growth in our economy and get back to a point where we can restore our reputation nationally, internationally and prove our point.
So that’s the challenge of politics. Nobody before me who sits in the Office of the Taoiseach has had to deal with the scale of the challenge. Equally so, nobody before me has had the mandate from the people to sort it out. They expect action. They expect change. They expect decisiveness and that’s what they are going to get.
DOYLE: Okay. So this is a good point to wrap it up. Unfortunately, we don’t have any time for any more questions, but just to let you know that the Taoiseach has graciously agreed to do a Bloomberg interview later on, so that will be aired this afternoon and there will be many more questions asked there.
And just to wrap up I would like to thank some people. First of all, I would like to thank all the clients for attending today, much appreciate your interest obviously. And second of all, I would like to thank Florence for organizing this fantastic event and third, and most importantly, I would like to thank the Taoiseach for agreeing to -
KENNY: Well, I would like to thank all the people here for taking the time to come along, and listen to us and participate here. And I hope you get a flavor of the seriousness of intent that we have got here. I believe our country is going to come through this stronger, with a better sense of values, will have a much stronger element in which to build the future. And I look forward to your participation in that. Thanks very much.
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