Irish Finance Minister Michael Noonan said rejecting the European fiscal pact would represent a “leap in the dark” as it risks cutting off funding for the country after the current bailout program ends.
“I think we are going to win” the referendum, said Noonan, speaking at Bloomberg Link’s Ireland Economic Summit in Dublin today. Passing the vote gives Ireland access to the European Stability Mechanism, the permanent euro-area rescue fund, in a “worst-case scenario” and is necessary to return to bond markets for investor confidence, he said.
Ireland, which is three-quarters through 33.4 billion euros ($42 billion) of budget cuts planned to stretch eight years through 2015, is holding the referendum to enshrine planned European fiscal rules in national law. Prime Minister Enda Kenny, speaking at the same event, said Ireland aims to return to markets next year as planned, and will stick to its 67.5 billion-euro bailout program approved in 2010.
Noonan said that while he is “pretty confident” voters will back the May 31 referendum, he isn’t becoming complacent. Support among Irish voters for the fiscal pact increased to 63 percent from 58 percent at the end of April, the Sunday Business Post reported on May 13, citing a poll carried out by Dublin-based market research company Red C.
The yield on Ireland’s 2020 bonds, regarded as the benchmark, has more than halved from a euro-era record of 15.5 percent in July. While Noonan said backing the treaty would further boost investor confidence in Ireland, Greece’s situation remains “very difficult.”
“There’s no pressure on them to leave,” he said. “If Greece sorts itself out democratically, there’s no question whatsoever of Greece leaving the euro.”
Greece will hold new elections that may threaten spending cuts required to secure 240 billion euros in bailouts. German Chancellor Angela Merkel and French President Francois Hollande have both said they would consider measures to spur Greece’s economy as long as voters commit to austerity.
Still, the European Central Bank and the European Commission are planning for “all eventualities,” according to Noonan. Ireland has received assurances during the crisis from European authorities that it will be supported if there is further contagion from Greece, he said.
The Irish economy, which has contracted about 15 percent since a real-estate collapse in 2008, is in a much better position than it was this time last year, Noonan said. It is difficult to predict if Ireland will get a deal on its banking debt, Noonan said, adding that alternatives exist to a re-engineering of the promissory notes used to bail out the former Anglo Irish Bank Corp. if the ECB doesn’t agree to an accord.