March 23, 2023

Euro Watch: Merkel Praises Irish Leader for Progress Against Debt

But more than accumulating honorary awards, Mr. Kenny would like to strike a deal on his country’s outstanding bank debt that would enable Ireland to resume raising money in the financial markets once its bailout money runs out.

German lawmakers and Chancellor Angela Merkel herself are quick to praise the Irish for the stoicism and determination with which they have responded to the demands that international lenders imposed in exchange for an €85 billion, or $110 billion, bailout in 2010. Those measures included deep budget cuts and higher taxes on Ireland’s already hard-pressed public.

“We have established that there is a special situation in Ireland, we are interested in a sustainable completion of the adjustment program,” Ms. Merkel said Thursday in Berlin, appearing alongside Mr. Kenny after the two met privately.

Germany cannot single-handedly grant Ireland’s wishes, of course. The Irish bailout was brokered by the so-called troika of lenders: the European Commission, the European Central Bank and the International Monetary Fund. But as the main European financier, Germany has clout.

Ms. Merkel on Monday dispatched her finance minister, Wolfgang Schäuble, to Dublin to hold talks with his Irish counterpart in an effort to find a deal.

When Ireland applied for its bailout from the euro zone fund in 2010, the financing was largely used to pay down banking debt that had ballooned during the 1990s, when the country became known as the Celtic Tiger, before the collapse of the Irish real estate market.

And Ireland has kept up its part of the bargain — unlike Greece, which required a second bailout and continues to struggle to satisfy its international lenders that it has exercised enough budget discipline to merit its next loan installment of €31.5 billion, or $40.7 billion, to avoid defaulting by the end of next month.

Ireland last week passed its eighth consecutive review by the troika. Mr. Kenny’s government has projected that the government budget deficit, which at its peak was 32.4 percent of gross domestic product, will be down to 8.6 percent of G.D.P. this year. And he said the government remained on track to reach its goal of 3 percent by 2015.

To honor Ireland’s diligence, and Mr. Kenny’s role in it, the German publishers plan to present him next week with a golden statuette: a replica of the mythical winged goddess who stands atop the Victory Column in the heart of Berlin.

“I think this award is absolutely justified,” Ms. Merkel said Thursday, “considering that what Ireland has achieved in terms of reforms, the changes the improvements in competitiveness and with that Ireland is one of the exceptional examples that Europe will emerge from this crisis stronger than it entered this crisis.”

But it would be hard-won strength.

Ireland is still grappling with high unemployment. Domestic consumer spending has been slow to pick up. And the government remains burdened with the staggering debt that it took on to recapitalize the country’s banks.

Against this backdrop, Dublin had hoped that once the European Stability Mechanism — the new, permanent European rescue fund — was in place, Ireland would also be able to draw from it to help finance its banking debt.

The chancellor has dashed that hope, insisting after a meeting of European leaders in Brussels last month that “if recapitalization is possible, it will come for the future.”

Although Ms. Merkel had been talking about Spain, the remark had reverberations in Dublin. That led to consultations by Ms. Merkel and Mr. Kenny, which continued with the meeting Thursday.

At the news conference, Mr. Kenny thanked the chancellor for her support of his country’s efforts, which he described as “an enormous challenge.”

On Jan. 1, Ireland takes over the rotating presidency of the European Union. Mr. Kenny said his government planned to focus on promoting growth and jobs and stabilizing the euro.

Article source: