We are the first country in the euro area to exit such a programme and it is a significant moment, not just for Ireland, but for Europe. This crisis has been a test of national governments, of European solidarity and of the European project itself. Our achievement today shows that while Europe needs to find answers to its critics, the critics must in turn recognise the real and substantial signs of progress, hard-won by our people.
The decision Ireland has taken to exit the programme without any further precautionary credit line is possible because of what we have achieved. Competitiveness has been regained as costs and prices have risen more slowly than our trading partners. We have made a budgetary adjustment equivalent to 18% of our GDP and introduced significant structural reforms. We have regained the confidence of international investors. We have funds immediately available to us equivalent to our entire funding needs in 2014. From next year, we will have a primary budget surplus, which means we are raising more in revenue than we spend on everything excluding debt interest.
But the measure of success I use before all of those is jobs. From a situation where we were losing 1,600 jobs a week during the crisis, we are now creating 1,200. Although unemployment remains unacceptably high at 12.5%, it has declined consistently from over 15% two years ago.
There is no better boost for national morale and no better measure of the recovering health of our real economy, and the sustainability of our future.
Job creation is fundamental to our plan of action in Ireland as it must be in Europe. During our EU presidency earlier this year, together with our EU partners we adopted important measures in this area. The establishment of a Youth Guarantee is perhaps the one that most directly addressed the concerns of a rising generation, who risk feeling that the future has less to offer them than it did for their parents. It states that we will not let our young people fall into unemployment without making every effort we can to equip them to succeed through hard work.
Of course, the primary task of political leaders is to set the right conditions for job creation, and that includes stable public finances, as well as targeted investment.
The example of Ireland shows that there is a difficult but achievable balancing act to be done. Through over 270 individual actions required by the EU/IMF programme, and enormous sacrifices from Irish households, we have brought our debt under control and made Ireland a safe bet for international lenders again. This has had to be balanced, however, with significant measures to ensure that the difficult solutions to our legacy of banking debt are achievable and respond to the most basic demands of justice. It has to be balanced with recognition that the sacrifices asked of people in the name of fiscal responsibility must not themselves fatally undermine the real economic growth necessary for any of this to work.
You cannot cut your way to jobs and growth, and you cannot spend your way to solvency. Where there is an undeniable commitment to reform of national public finances, this must be matched with collective European action to ease the burden, especially in terms of breaking the vicious circle of banking and sovereign debt.
I am glad to say that, in Ireland’s case, the European response has been forthcoming in some important areas. Key terms of the programme were renegotiated, the interest rate reduced and a resolution found to the issue of the Anglo Irish Bank promissory note.
However, work remains to be done at a European level. We must complete the banking union project, involving not just common supervision, but a common resolution framework with an appropriate fiscal backstop and effective deposit insurance arrangements.
If a bank anywhere in Europe can pose a threat to the financial system of all its members, the necessary framework must be in place to respond to that risk. We have set out deliberately to integrate the European economy for the prosperity–and security of all our people. We seek to realise the benefits together, and we must guard against the risks together.
The people of Ireland have already been working for years, and will be working for many more, to emerge from under the weight of debt recklessly accumulated by a handful of banks, as well as the unwinding of the property and construction bubble it financed.
Through their determination, and with the solidarity of our partners in Europe, we are showing it can be done, and that Europe can rise to the challenges that the global financial crisis has thrown at us.
Our determination will not falter now that we are beginning to see results, and nor must Europe’s commitment to shared and decisive action.
Links and references
Visit the government of Ireland’s Department of Foreign Affair’s website at www.dfa.ie
See also www.gilmore.ie
Noonan Michael (2013), “Ireland's EU presidency: Towards stability, jobs and growth” in OECD Observer, No 295 Q2 2013: www.oecdobserver.org/news/fullstory.php/aid/4139/
© OECD Observer No 297, Q4 December 2013
The first sentence of this article was revised 23 December 2013 to add the date for exiting the programme.