Ireland's new Finance Minister Michael Noonan talks to Vincent Murphy about the bailout, his first 100 days in the job, and how the Irish overseas can help the recovery
“I’m on my third Taoiseach, you know,” laughs Michael Noonan, when I ask him how he’s coping with the toughest job in Ireland right now.
“I was there with Garret Fitzgerald and I was there with John Bruton. And I’m now there with Enda Kenny. So I’ve held a number of ministries. And I’m glad to be given the opportunity again to make a contribution.” Fine Gael has not been in government for a long time – but in their new Finance Minister, they have a wily pair of hands. Noonan has been around the block – several times.
And now the Limerick man is facing his biggest challenge – taking over the reins at the Department of Finance as Ireland struggles with an unprecedented debt and banking crisis. “Things got into a crisis in Ireland, and all I can say is I’m going to work every day to get us out of it,” he says.
In many ways his hands are tied as Finance Minister, with the State effectively locked-in to the IMF/EU/ECB rescue package agreed by his predecessor. The day before we meet, during an interview, Noonan re-opened the debate on burning senior bondholders at Anglo Irish Bank and Irish Nationwide. He said, as Anglo was no longer a bank in any real sense, he believed losses should be imposed on the bondholders. His comments were front page news on the Financial Times in Europe next day, alongside reports of the escalating crisis in Greece.
And as a result, he was trying to dampen the fire, when we met, arguing that his comments had been given a weight they didn’t deserve, because of what was happening in Greece. “We are saying publicly that everything that has been given to us as a country, or has been given to us in our banking system, that we’ll repay to the last cent. And that’s our commitment to the senior bondholders everywhere,” he said. He added that, while his comments were accurately reported, he wanted to frame them in the context of the continuing review of the rescue program.
There is estimated to be around €3.1bn in the relevant Anglo bonds and around €600m in Irish Nationwide bonds. “Everybody knows about Anglo,” he says, “I mean, Anglo is Anglo. And all I’m saying is there are issues that haven’t been fully resolved but that we are not going to make any kind of unilateral move. We are going to discuss these issues with the IMF, European Commission and European Central Bank. And the discussions aren’t imminent either. You know, this is something for the Autumn. So we are not even looking for meetings on these issues at the moment.”
It was a fascinating snapshot of the kind of pressure the new Finance Minister is under, and how careful he has to be with the words he chooses, and how the global financial markets hang on his every utterance.
"We have been working day and night on it, you know,” he says, “I’m hardly seeing home, or hardly seeing the constituency"
Noonan was in New York and Washington last week for over 16 meetings with business leaders and opinion makers. His message was simple – the new government in Ireland is sticking to the terms of the bailout deal. “It’s like a contract,” he explains, “where there are literally dozens of conditions, and when you fulfill the conditions on a timeline, you are allowed to draw down money. You can draw down money to pay the day-to-day needs of the State, whether it’s the health service or paying the teachers or the Gardai, and then there is another side where you can draw down when you need to capitalize the banks. So I was confirming that we’re committed to the program, we’re sticking by the program and we’re going to see it through.”
US Treasury Secretary Tim Geithner and the top officials at the IMF were among those who took time to meet the Minister during his visit to Washington. Noonan was also keen to draw attention to the differences between Ireland and Greece, as the world’s attention is focused on Athens. “We keep saying Ireland is not Greece, and people understand that, but when it comes to issues like this, the international financial media tend to box us together,” he says.
Whatever happens to Greece will have a major impact, not just on Ireland, but on the whole Eurozone. But Noonan knows Ireland is not in any position to direct events. “In the real world, it’s the stronger nations in Europe that will make the decisions about Greece,” he explains, “Now, the definition of the stronger nations are the Triple A countries – those that have a triple A credit rating. Finland is one of those even though it is a small country, Slovenia is one of those even though it’s small. Ireland won’t have a very strong voice in designing the solution, and our primary interest is to ensure that any solution arrived at doesn’t damage us.”
While Europe is dealing with the Greek crisis, Ireland’s attempts to have the terms of its bailout deal reviewed will have to wait. The government is keen to have the interest rate it is being charged reduced, but is facing some opposition from France and Germany, who are looking for changes to Ireland’s low corporate tax rate in return. That’s non-negotiable as far as Noonan is concerned: “It’s part of our industrial relations policy, and we will not negotiate it away under any circumstances.”
While in the US, Noonan was also keeping a close eye on negotiations over the sale of Anglo assets here. These are properties worth up to €11 billion – a mix of hotels, shopping centers and apartment blocks, mostly in the North East, from New York up to Boston. As part of the wind-down of Anglo, the government hopes to sell these assets. “These are very good assets now. These are not impaired assets at all. All this stuff is leased or rented and is generating income. So these are very attractive on the market. We’re trying to reduce the size of the banks by disposing of their assets abroad.”
By coincidence, it’s exactly 100 days since the new government was formed on the day we meet. I ask him to rate how he believes he’s done. “Very busy,” he says, before listing off what he’s undertaking since taking up the position.
“We totally restructured the banking system in accordance with the program. We did that in the first three weeks and made all the necessary announcements and we’re implementing that now with a view to making the banks fully recapitalized in line with the new stress testing by the 31st July.
“We’re looking for private money in Bank of Ireland. We’ve commenced the legal merger of EBS and Allied Irish Bank, we are talking to people to sell off the insurance arm of Irish Life and Permanent.
“On the bondholders, we have gone to court and made arrangements and offers, for subordinate bondholders and we had the first success in that two weeks ago when we got agreement from 86% of the bondholders in AIB to accept the discounts offered. That’s worth, by the time the second tranche comes through, almost two billion to the Irish taxpayer.
“And we’re proceeding the same way now with Bank of Ireland. We want to see if we can arrange debt for equity swaps there. We’d like to keep Bank of Ireland as a publicly quoted bank, with majority private ownership. And then we’re moving on to EBS and Irish Life and Permanent.
“So we have, not only made the initial announcements about the structures, we are systematically implementing them and that’s a huge quantity of work in the first 100 days.
“The second thing we did then was we renegotiated the program that had been agreed by the previous government and we got some major concessions on it. Particularly, room to implement the jobs initiative because we had to change things around on the program to get that implemented.
“We also, on NAMA, got an agreement that assets below €20m in value would remain in their parent banks and wouldn’t be switched to NAMA which was very important.
“And we’ve got a review build in after 2012, and we got an extension on the time for the bailout, so it’s getting the deficit down to 3% by 2015 now.
“And of course, for the jobs initiative then, we had to put a Finance Bill in place. And we had to implement that.
“So systematically, we are ticking the boxes and we are meeting the commitments in the program on a timeline.”
“I hope that most of the decisions we make will be good ones and that the ones that aren’t good ones, we’ll have the sense to admit it early and change”
It’s a thankless and tiring job.
“We have been working day and night on it, you know,” he says, “I’m hardly seeing home, or hardly seeing the constituency – that work is being done with the help of other people. But it’s Dublin all the time in the Ministry doing the job that’s required.”
He says the new government is very conscious of how difficult it is for young people to find work in Ireland. But he argues that things are still not as bad as they were in the 1980s. “Back then there were only around 900,000 people at work. But this week’s figures have 1.8 million people at work – it’s nearly double. So even at the bottom of the cycle - and it looks that unemployment has bottomed out now - there’s 1.8m at work. And they’ve gone up the skill chain as well, the people who are at work.”
He said foreign direct investment is strong in Ireland, with the IDA successfully attracting companies, particularly form the US. Exports are booming, and he expects a Balance of Payments surplus this year. And he’s also targeted tourism as a key sector for recovery. The numbers visiting Ireland have declined 30% over a three year period, and Noonan sees regaining that lost ground as a priority. With that in mind he has an appeal to Irish Americans. “You know, people often say to me: You have trouble at home. What can we do? We feel that the crisis is too big and we can’t make any contribution to the solution,” he says. “Well my message is, if you can convince one friend to visit Ireland this summer, do. There’s a lot of Irish abroad, and if they can convince one person to come, it will swell the numbers.”
Noonan says he believes things are beginning to build up again in Ireland. “I hope that most of the decisions we make will be good ones and that the ones that aren’t good ones, we’ll have the sense to admit it early and change,” he says. “We’re very conscious of building morale and confidence. We’re moving on. So far, so good.”
This article first appeared in the Irish Examiner USA June 21st issue
