Ireland’s bailout masters start their tenth review of the rescue tomorrow as a labor-union rejection of public-sector pay cuts complicates the government’s plan to regain economic sovereignty.
The troika of the European Central Bank, the International Monetary Fund, and the European Commission arrive in Dublin to examine Ireland’s progress, as the state seeks to exit the bailout program at the end of the year.
The troika arrive a week after Irish public sector trade unions rejected government proposals last week to reduce salaries for some of the best-paid public workers by at least 5.5 percent, dealing Prime Minister Enda Kenny his biggest setback since taking office in 2011. Kenny told lawmakers last week his government is committed to making the 300 million euros ($391 million) in payroll savings this year.
“After the rejection of the pay deal last week, intense discussions on the options now available for the government may be the most fraught,” Dermot O’Leary, an economist at Goodbody Stockbrokers, said in a note today.
The government is aiming to resolve the impasse before the cuts need to be implemented in July, Finance Minister Michael Noonan was quoted as telling the Irish Times in an interview published today. Separately, the newspaper said the 2014 budget will contain a “strong gesture” to taxpayers to show the era of austerity is drawing to a close, citing an unnamed government minister.
Noonan will this week is due to release his medium-term economic and budgetary plan. The fiscal deficit this year may narrow to 7.4 percent of gross domestic product, beating the program target of 7.5 percent, the ministry said today.
“With public finances better than targets in the first quarter, Ireland is likely to pass the latest review and thus receive the latest tranche of aid,” said O’Leary. “Nevertheless, with some important issues remaining, the report card is not going to be totally unblemished.”