Ireland rejects Stark's call for more austerity

DUBLIN Tue Sep 13, 2011 9:20am BST

DUBLIN (Reuters) - Ireland's deputy prime minister rejected a call from the ECB's departing chief economist Juergen Stark to ramp up its austerity programme and cut public sector pay again, describing it as "not helpful" in comments published on Tuesday.

Stark made the call in an interview hours before his shock resignation on Friday, increasing pressure on the government to go beyond the 3.6 billion euros (3.1 billion pounds) in austerity measures planned for next year and putting its pledge to protect public sector wages under scrutiny.

"Individuals -- in this case an individual who has now resigned from the post -- inventing new agendas for where the government should be going is not helpful," Eamon Gilmore was quoted as saying by the Irish Independent.

"We have an agreement, we have a programme with the troika (of the ECB, IMF and European Commission), we're implementing it and we're going to continue to do that," he told the daily.

"We haven't been asked by the troika to go beyond it and we don't intend to go beyond it," he said.

Stark, the top German at the European Central Bank (ECB), resigned in a conflict over its bond-buying programme but remains on its board until a successor is appointed.

The ECB is part of the troika of official creditors, along with the International Monetary Fund and the European Commission, which monitors Dublin's bailout progress. The ECB has lent banks in Ireland nearly 100 billion euros in emergency liquidity.

In an interview with the Irish Times published on Monday, Stark called on the Irish government to be more ambitious in cutting the public deficit ratio and complained that the wages for civil servants in Ireland were significantly higher than in many countries providing financial support to Ireland.

"That kind of encouragement from the sideline, we don't need it and it doesn't help what we have to do," the Irish Times quoted Gilmore as saying.

Ireland has cut public sector pay by an average of 15 percent since 2008 but Stark said Irish and Greek workers were still better paid than their counterparts across Europe despite both countries being forced into emergency bailouts.

Gilmore said the government would adhere to a pledge not to cut public sector pay again and avoid forced job cuts as long as unions agree to voluntary redundancies and longer working hours.

Breaking this "Croke Park" deal could trigger industrial unrest and undermine the government's ability to get Ireland's budget deficit under an EU limit of 3 percent of gross domestic product(GDP) by 2015 from an estimated 10 percent this year.

"We're honouring the Croke Park agreement, and we're going to honour it and we're going to work it," Gilmore told the Irish Independent.

Ireland's Finance Minister Michael Noonan, a member of the senior party in the coalition government, the centre-right Fine Gael party, has already said he is considering raising the level of adjustment for the 2012 budget to 4 billion euros from 3.6 billion euros currently.

Stark's intervention, however, makes things difficult for Labour, the junior coalition partner led by Gilmore, who said during the election campaign that a vote for them meant things would be done "Labour's way" rather than "Frankfurt's way."

Gimlore said the government had not agreed to an IMF request for Ireland to increase its privatisation budget to 5 billion euros from 2 billion euros.

"We have never agreed to 5 billion euros," he told the Irish Independent.

(Reporting by Conor Humphries; Editing by Anna Willard)