–Warns More Consolidation May Be Needed If Growth Turns Weaker>}
–Says State Must Avoid Being Seen As Among ‘Most Worrying’

LONDON (MNI) – The Central Bank of Ireland today called on the
Irish government to stick rigourously to the fiscal consolidation plan
it has embarked on.

In its latest quarterly bulletin, the bank also urged the
government to set out further details on its future spending plans and
warned it may have to do more if growth turns out weaker than the 4% per
year assumption in its plan.

“While the overall extent of the fiscal adjustment has been clearly
indicated and an impressive start has been made, it would enhance
confidence further to set out in somewhat greater detail the nature of
the further adjustment measures planned for future years. In addition,
given that the adjustment programme assumes average economic growth of
about 4% between 2011 and 2014 and, in order to adhere to the agreed
consolidation plan, the Government must stand ready to take further
action if growth is weaker than assumed”.

But the bank noted that so far the plan has worked in terms of
steadying market confidence:

“Domestic consumer and investor confidence, while still well below
the levels obtaining prior to the downturn, has also continued to edge
upwards. In the current international environment, it is more important
than ever to adhere strictly to the agreed fiscal consolidation plan.”

The government must make sure it is not perceived as one of the
‘most worrying’ sovereign risks, the bank says:

“…it is important to ensure that the state can access funds on
good terms and avoid being classified amongst those countries whose
fiscal situation is the most worrying. Any slippage would be certain to
damage confidence, both internationally and domestically, which will
adversely impact on the economy.”

The comments come as spreads on Greek government bonds are hitting
new highs and speculation mounts that Greece may be obliged to trigger
the plan agreed by the EU to rescue the country from possible default.

–London Bureau; Tel:+44 207 862 7492; email: ukeditorial@marketnews.com

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