–Fund Can’t Lend Directly to Ireland Banks Without Gov’t Request
–Important to Maintain Watch Over Ireland Situation

By Denny Gulino

WASHINGTON (MNI) – Although there has as yet been no formal request
for aid, an IMF Mission will begin “technical” talks with Ireland
government authorities within 24 hours and it is premature to discuss
the Fund’s view of specifics, like the preservation of Ireland’s
relatively low corporate tax rate, a Fund spokeswoman said Thursday.

While refusing to address hypothetical questions about any IMF aid
to Ireland, spokeswoman Caroline Atkinson told reporters that in similar
cases, “We believe that it’s important to have government ownership of
policy measures.”

She said in Greece, “there has been important public ownership even
though measures the government is taking there have been quite

In Ireland, the government’s fiscal adjustment plan, supported by
the euro group, “is obviously difficult but it recognizes that some
fiscal adjustment is necessary to deal with the aftermath of the boom
and the crisis.”

The IMF mission in Ireland “is looking at the situation in
particular in the financial sector given the concerns about market
risks,” she said.

In the past, the IMF has issued positive statements about Ireland’s
budget plan “and I have no reason to change that,” she said. However,
she added, “You know as well as I do that what’s happened in the
meantime is that there have been some market pressures and in reaction
to that the Irish government has been concerned … about the best ways
to reinforce financial stability in Ireland to lay the foundation for a
strong recovery.”

“Obviously things can change,” she continued, “but right now we
plan to begin technical discussions tomorrow with the Irish
authorities.” She said the IMF is prepared to react quickly and flexibly
to any Ireland request for help.

“We’re not in program discussions,” she added. “We’re having
technical discussions” and the EU and the ECB are a party to those

“There’s a mission in the field,” she said. “I’m not going to
comment on how their analysis will evolve. We’ve commented already on
the underlying situation but for every country policies evolve in
reaction to the situation in which countries find themselves.”

She said the Fund cannot lend directly to Irish banks and “we only
lend money when governments make a request.” So far, there has been no
formal request for Fund aid, she said.

“Ireland is very important,” she said. “It is a relatively small
part, about 1% of euro area GDP, but of course it is important to
maintain a watch on these sorts of situations as the euro authorities
and the IMF and indeed others are doing.”

Asked if the IMF would be more lenient than the ECB in allowing
Ireland to maintain low corporate tax rates to attract investment, she
said that kind of question is premature, given the talks have not yet

Asked if the IMF is prepared to impose harsh measures on Ireland,
she said that part of any program “is to make sure that the most
vulnerable and the poorest are protected.”

“We get called in because the patient is sick,” she continued. “We
have some medicine, which is the liquidity and the funds that we can
provide, but we also have to suggest some — whether it’s dieting if
you’ve got a heart problem — some other measures that may sometimes be
difficult for countries to implement.”

The IMF, she said, is “smoothing that adjustment” by providing
money so that “countries don’t actually have to take such difficult
measures as they would have to without the money.”

Increasingly over the last couple of years, she said, the IMF “has
been very focused on the need for what we’ve been calling social
conditionality, the need to protect the poorest and most vulnerable.”

Turning to Spain, she said its challenges are different than those
of Ireland and that Spain has already undertaken significant fiscal and
structural reform. “We have seen the Spanish government take strong
measures both to address fiscal issues and structural reforms and we
expect those to continue” and they, she said, are “the kind of thing
that helps to support against any threat of contagion.”

“We feel the Spanish government has been in control of the
situation,” she said. “Spain’s situation now is clearly different from
that of Ireland” and its banking system. In Spain, she said, the
challenges include growth and unemployment “as well as the market

On another subject, Argentina, she acknowledged “that the Paris
Club has indicated a willingness to have discussions with Argentina on
repayment over a short period of time of their loans. That has been done
in other cases. That is not a restructuring,” she said, “which
traditionally involves an IMF program.” Repayment “would probably be a
good thing” and the time period would be something for the Paris Club
and Argentina to discuss.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$X$$$,MI$$$$,M$U$$$,M$$FX$,MFX$$$,MGX$$$,MGT$$$,MFT$$$]