Ireland's finance minister Friday called on the European Central
Bank to launch a program of quantitative easing, and said the
government will repay half of its loans from the International
Monetary Fund in the coming weeks.
In an interview with Ireland's Newstalk radio station, Michael
Noonan said the stronger performance of the U.S. and U.K. economies
in recent years was proof of the efficacy of QE, under which
central banks buy government bonds and other assets using freshly
created money.
Figures released Friday showed the annual rate of inflation in
the eurozone slipped back to a five-year low of 0.3% in November,
while the number of people without jobs rose for the second
straight month in October.
Mr. Noonan said that while the eurozone's crisis "in terms of
collapse is over," the central bank needed to do more to aid the
economic recovery.
"There is one piece missing--the ability of the central bank to
do quantitative easing," he said. "Monetary policy in Europe is
very weak."
Mr. Noonan noted that the U.S. and U.K. economies are growing
much more rapidly than their eurozone counterparts.
"The difference was their central banks were able to intervene,"
he said. "There is still a flaw in the European system."
Recent comments by senior ECB officials have heightened investor
expectations that the central bank will start to buy government
bonds early next year.
ECB President Mario Draghi on Nov. 21 put financial markets on
alert that the ECB was losing patience with ultralow levels of
inflation and was ready to do more.
His deputy, Vitor Constancio, on Wednesday sent the strongest
signal to date that the ECB is prepared to buy government bonds
early next year if it decides that more aggressive stimulus
measures are needed.
Mr. Noonan also said the government will repay half of its EUR18
billion ($22.5 billion) in loans from the IMF before the end of the
year, a move he said will reduce its interest payments by EUR750
million over the next five years.
The government announced its intention to repay the loans
earlier this year, using money raised through bond sales at a lower
interest rate than is charged by the IMF. Mr. Noonan said that
while the IMF charges an interest rate of 5% on its loans, the
government can borrow from the bond markets at around 2%.
He said the government will sell more bonds in the first half of
next year to repay the remaining EUR9 billion. The IMF loans were
due to be repaid by 2023.
The IMF provided the loans as part of an international bailout
arranged for the Irish government in late 2010. By that time, the
Irish government had spent large sums propping up banks that faced
heavy losses in the wake of a property market crash. Yields on
Irish government bonds were surging as investors speculated on how
much it would ultimately cost the government to repair the banking
system, making it difficult for the government to finance itself on
affordable terms.
Mr. Noonan said he is "confident" the government will recoup the
money it invested in the troubled banks, including EUR21 billion in
AIB. However, he said that will take a number of years, and said
there will be no "fire sale" of the government's remaining holdings
of bank shares.
The finance minister said he had received an offer for the
government's stake in AIB on Wednesday, but the sum was too low. He
added that he has "no intention" of selling the government's stake
in the Bank of Ireland.
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