BRUSSELS (MNI) – Ireland needs to cut its minimum wage and decrease
the benefits it pays out to the unemployed, the International Monetary
Fund recommended in a paper on euro area structural reform priorities,
released Monday.

The paper – which looks at key areas of structural reform across
the Eurozone – might give clues to the conditionality which will be
attached to an aid deal for debt-ridden Ireland that is currently being
thrashed out in Dublin with the IMF, the European Commission and the
European Central Bank.

Ireland confirmed late Sunday that it had requested formal talks
with the IMF, ECB and EU to negotiate the terms of an aid deal, which
will come with strict conditionality.

Raising employment and improving competitiveness are the two areas
of reform priority set out for Ireland in the paper, which was
authorized for distribution by the IMF’s European Department deputy
head, Ajai Chopra.

The paper also sets out specific recommendations for ways to attain
these goals, including:

“Introduce gradual decrease of benefits over time of unemployment
spell and stricter job search requirements” and “review the level of
minimum wage to make it consistent with the general fall in wages.”

Other recommendations by the IMF include more resources for “job
search assistance” and a refocusing of public resources to target
projects “in the knowledge-based economy.”

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 Portugal.

Overall for the Eurozone, the IMF paper said that fixing the
financial system is urgent and that more jobs need to be created.

In Portugal, the IMF paper said, the authorities need to take
action to “make the labor market work better” and to “further improve
the business environment.”

In Spain, “regaining competitiveness and boosting production in the
tradable sector is the priority,” the IMF said.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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