BRUSSELS (MNI) – Olli Rehn, the European Commissioner for Economic
and Monetary Affairs, on Monday downplayed contagion fears by drawing a
distinction between Ireland and Portugal.
“The nature of the problems in Ireland are very different from, for
instance Portugal,” Rehn told reporters on the sidelines of a European
Commission conference in Brussels. “In Ireland it’s a matter of very
fundamental weaknesses in the banking sector, which now have to be
addressed in a decisive manner. Meanwhile, Portugal’s challengers are
rather related to the rate of potential growth and private debt,” he
“Portugal has taken very bold decisions concerning fiscal
consolidation and is intensifying fiscal reforms,” Rehn added.
Ireland confirmed late Sunday that it has requested formal talks
with the IMF, ECB and EU to negotiate the terms of an aid deal, which
will come with strict conditionality. Some policymakers have expressed
concern that, if not addressed, market fears about Ireland could spread
to other high debt and deficit Eurozone countries, such as Spain or
“I am usually quite hesitant in commenting on the markets…But I
repeat what I said: the cases are very different and it is now essential
to calm the turbulence which is centered around Ireland,” Rehn said,
when asked about contagion fears.
Slower than expected growth and the cost of bailing out its banking
system will push Ireland’s budget deficit to 32% of its GDP this year.
The Irish government has committed to getting the deficit below the EU’s
3% limit by 2014. Stripping out the banks, the deficit will be around
11.9% this year, still one of the largest in the Eurozone.
“The EU/IMF programme is going to be based on strong
conditionality. The four-year fiscal plan and next year’s budget decided
by the Irish government form a sound basis,” Rehn said.
“It is evident that after what has happened during the present
decade, Ireland will cease to be a low-tax country and will become a
normal tax country in the European context,” he said. “Which kind of
specific tax increases is, in the first place, in the hands of the Irish
government,” he added.
He said the work on an aid package for Ireland would be completed
by the end of the month.
–Brussels: 0032 487 (0) 32 803 665, firstname.lastname@example.org