DUBLIN—Ireland's economy could be on the verge of a strong recovery that would help the government regain access to the international bond markets next year, the deputy finance minister said.
In an interview with Dow Jones Newswires, Brian Hayes, a Minister of State in Ireland's coalition government, also said that an agreement to refinance a total of €58 billion ($75.78 billion) of bank debt with loans from the euro zone's bailout funds would ensure the government could once again rely on private investors to meet its financial needs.
Mr. Hayes said the government expects to rebuild the economy "brick by brick" and "step by step" in order to overcome its deep debt crisis.
However, he said recent data that showed the government took in more tax revenues so far this year, that international companies are investing, and that the country had stopped "hemorrhaging" jobs were the first signs that the crisis could be ending.
"So all the ingredients are there if and when the international economy improves," Mr. Hayes said.
"All of it points in the right direction. It would be wrong to give some sort of overglamorous analysis at the moment. The minister of finance has said the ingredients are there if and when the world economy and then the Irish economy will improve."
If the Irish economy grew by around 2.5% next year, the country "would certainly be well over the crisis and on the way back to the markets," he said.
Ireland's government is in the fifth year of cutbacks, following the end of a property and construction boom that left it with a large bill for rescuing the nation's stricken banks.
It had to strike a deal for €67.5 billion in bailout loans with the EU, International Monetary Fund and European Central Bank in late 2010 when investors stopped buying its bonds. It is seeking to return to international debt markets by the time the bailout program ends late next year.
In a quarterly forecast published Wednesday, the Irish central bank said it detected signs the Irish economy was stabilizing and projected Irish gross domestic product will grow 0.5% this year and by 2.1% in 2013.
The Irish economy slipped back into recession in the final quarter of last year. But surveys of purchasing managers for March suggest the economy is growing again.
Mr. Hayes said that the best possible outcome in negotiations with its bailout lenders would be to refinance €31 billion in promissory notes pledged to now-defunct banks through the European Financial Stability Facility, or the EFSF—the temporary fund for troubled euro zone countries that is already helping finance Ireland's bailout.
In late March, the government replaced a cash payment of €3.06 billion it was due to pay out on the promissory notes with a long-term government bond.
It wants to refinance the rest of the €28 billion of the notes through the EFSF.
And though it hopes in the next few weeks to secure the support of its EU, IMF and ECB bailout lenders for a deal on the notes, political permission then would be required from other euro-zone governments, Mr. Hayes said.
He said he didn't expect the issue to be resolved before Ireland votes in a public referendum on the EU budget-discipline treaty on May 31.
"A good deal [on the €28 billion of notes] for Ireland would be stretching out the payments over a longer period with a more competitive interest rate," he said.
"I am not going to speculate on [how many years] but significantly more years than is currently there in terms of the existing deal..would certainly help the debt profile."
Mr. Hayes said the government is also hoping to address the problem of about €30 billion in loss-making tracker home-loan mortgages held by Irish banks.
The mortgages are losing money for banks because the loans cost customers very little above ECB rates, and don't adequately reflect the costs incurred by the banks.
"I think people recognize that they are a noose around the [lenders'] necks," he said.
Any early deal on the home loans could mean they too will be refinanced through the EFSF, Mr. Hayes said. But the timeline of negotiations more likely suggests that this deal would be some how refinanced using the European Stability Mechanism, the permanent replacement for the EFSF, he said.
Mr. Hayes was appointed to the Irish finance ministry over a year ago when the Fine Gael party—led by Prime Minister Enda Kenny—swept to power with its junior coalition partner, the Labour Party.
Mr. Hayes spoke on the sidelines of a debate organized Thursday night by the Irish National Forum, a center-right think tank, on the European Union budget-discipline treaty.
The Irish government has said it is obliged by its constitution to pass the EU fiscal treaty in a public vote on May 31. A no vote would prevent Ireland getting access to the ESM, if the country were to require more funding in the future.
Mr. Hayes said Ireland needed "the safety net" of having access to the ESM to reassure private bond investors to buy the country's bonds next year.
"The government has made it clear that we accept we will pay our debts," he said. "It is important that the international community should know that because we want to be refinanced by the international community ultimately when we come out of this program.
And you don't regain access by saying to people we are going to default on debt."
wsj.com
In an interview with Dow Jones Newswires, Brian Hayes, a Minister of State in Ireland's coalition government, also said that an agreement to refinance a total of €58 billion ($75.78 billion) of bank debt with loans from the euro zone's bailout funds would ensure the government could once again rely on private investors to meet its financial needs.
Mr. Hayes said the government expects to rebuild the economy "brick by brick" and "step by step" in order to overcome its deep debt crisis.
However, he said recent data that showed the government took in more tax revenues so far this year, that international companies are investing, and that the country had stopped "hemorrhaging" jobs were the first signs that the crisis could be ending.
"So all the ingredients are there if and when the international economy improves," Mr. Hayes said.
"All of it points in the right direction. It would be wrong to give some sort of overglamorous analysis at the moment. The minister of finance has said the ingredients are there if and when the world economy and then the Irish economy will improve."
If the Irish economy grew by around 2.5% next year, the country "would certainly be well over the crisis and on the way back to the markets," he said.
Ireland's government is in the fifth year of cutbacks, following the end of a property and construction boom that left it with a large bill for rescuing the nation's stricken banks.
It had to strike a deal for €67.5 billion in bailout loans with the EU, International Monetary Fund and European Central Bank in late 2010 when investors stopped buying its bonds. It is seeking to return to international debt markets by the time the bailout program ends late next year.
In a quarterly forecast published Wednesday, the Irish central bank said it detected signs the Irish economy was stabilizing and projected Irish gross domestic product will grow 0.5% this year and by 2.1% in 2013.
The Irish economy slipped back into recession in the final quarter of last year. But surveys of purchasing managers for March suggest the economy is growing again.
Mr. Hayes said that the best possible outcome in negotiations with its bailout lenders would be to refinance €31 billion in promissory notes pledged to now-defunct banks through the European Financial Stability Facility, or the EFSF—the temporary fund for troubled euro zone countries that is already helping finance Ireland's bailout.
In late March, the government replaced a cash payment of €3.06 billion it was due to pay out on the promissory notes with a long-term government bond.
It wants to refinance the rest of the €28 billion of the notes through the EFSF.
And though it hopes in the next few weeks to secure the support of its EU, IMF and ECB bailout lenders for a deal on the notes, political permission then would be required from other euro-zone governments, Mr. Hayes said.
He said he didn't expect the issue to be resolved before Ireland votes in a public referendum on the EU budget-discipline treaty on May 31.
"A good deal [on the €28 billion of notes] for Ireland would be stretching out the payments over a longer period with a more competitive interest rate," he said.
"I am not going to speculate on [how many years] but significantly more years than is currently there in terms of the existing deal..would certainly help the debt profile."
Mr. Hayes said the government is also hoping to address the problem of about €30 billion in loss-making tracker home-loan mortgages held by Irish banks.
The mortgages are losing money for banks because the loans cost customers very little above ECB rates, and don't adequately reflect the costs incurred by the banks.
"I think people recognize that they are a noose around the [lenders'] necks," he said.
Any early deal on the home loans could mean they too will be refinanced through the EFSF, Mr. Hayes said. But the timeline of negotiations more likely suggests that this deal would be some how refinanced using the European Stability Mechanism, the permanent replacement for the EFSF, he said.
Mr. Hayes was appointed to the Irish finance ministry over a year ago when the Fine Gael party—led by Prime Minister Enda Kenny—swept to power with its junior coalition partner, the Labour Party.
Mr. Hayes spoke on the sidelines of a debate organized Thursday night by the Irish National Forum, a center-right think tank, on the European Union budget-discipline treaty.
The Irish government has said it is obliged by its constitution to pass the EU fiscal treaty in a public vote on May 31. A no vote would prevent Ireland getting access to the ESM, if the country were to require more funding in the future.
Mr. Hayes said Ireland needed "the safety net" of having access to the ESM to reassure private bond investors to buy the country's bonds next year.
"The government has made it clear that we accept we will pay our debts," he said. "It is important that the international community should know that because we want to be refinanced by the international community ultimately when we come out of this program.
And you don't regain access by saying to people we are going to default on debt."
wsj.com
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