Asmussen offers ECB’s take on Irish path to recovery
Jörg Asmussen says Ireland has come a long way but still has work to do; expresses confidence further emergency support from eurozone will not be necessary
Jörg Asmussen, a member of the executive board at the European Central Bank (ECB), on April 12 applauded Ireland for the work done so far in rebuilding the country’s economy, but cautioned against complacency.
Speaking at the Institute of International and European Affairs in Dublin, Asmussen said Ireland was “one among several countries with more severe adjustment needs”, in the areas of fiscal consolidation and growth-enhancing structural reforms.
He said Ireland had woken to a “painful new reality” with the bursting of the housing bubble in 2007. “Extraordinarily high growth in the run-up to the crisis had gone hand-in-hand with the build-up of economic and financial imbalances,” Asmussen added.
Discussing the changes Ireland was forced to make to combat the effects of the severe downturn in the economy, Asmussen also made it clear how much external support was offered. “I would like to present a clear view on how the ECB has supported Ireland through the adjustment process, working as a true partner to help this country resolve its problems,” he said.
Ireland had, the ECB official said, “received unprecedented support from other European member states. The Eurosystem has, within the limits of its mandate, been very supportive of the Irish banking sector, and thus of the programme for Ireland”.
Asmussen discussed the “difficult balancing act” facing policymakers in deciding when to reverse support mechanisms. “Wean the patient off the support too quickly and we might set back the recovery,” he said. “Leave it too long and we risk dependency, undermining efforts for adjustment and impeding the return to full fitness.”
One objective for Ireland must be that the reliance of Irish banks on central bank funding and in particular on the emergency liquidity assistance be reduced “over time”, Asmussen said.
He added that he was “confident that Ireland will continue to fully implement the necessary adjustment and reforms, and that on this basis, member states will continue to show solidarity towards Ireland”.
Asmussen concluded by discussing how all parties involved would celebrate when the time comes for the Troika to leave Dublin, hinting that he expected that time to be soon. “As long as Ireland continues to implement fully its programme and preserves its credibility as a State that honours all its obligations, I think that day will come in the not too long future, at the end of this programme in 2013,” he said, indicating that he did not believe a further bailout would be necessary.