Euro chief Juergen Stark demands Ireland cuts more to meet bailout terms

Euro chief says cut more

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Foreign Minister Eamon Gilmore

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Jack O'Connor, general president of Ireland’s largest trade union, SIPTU, said workers would not stand for Stark’s prescriptions.

“It's a good day for Europe that he resigned,” he said, "Stark is departing for “personal reasons,” but his move is widely believed to reflect his growing unhappiness at the ECB’s purchase of sovereign bonds.

However, his views on Ireland represent the position of the ECB which is a member of the “troika” that is overseeing Ireland’s bailout program.

Stark, the top German official in the ECB, argued that public sector pay in Ireland is too high by euro zone standards and should be cut to help restore order to the country’s public finances.

Any such move would bring down the Croke Park deal, which obliges the government not to cut public pay.

However, Stark said the government should consider from a political point of view that civil service pay in many of the countries supporting the Irish bailout was considerably lower than in Ireland.

He insisted the Fine Gael-Labor coalition had the benefit of a very strong mandate from the electorate and should take advantage of that to adopt a tougher deficit-cutting target in the 2012 budget.

Stark said, “I think the Irish government has the chance to surprise the market positively. We know that after a certain period of time there is always a risk of reform fatigue. The government should be even more ambitious in cutting the public deficit ratio, which is still at double-digit level.”

Although he insisted it was not for him as a central banker to call for social welfare cuts, he said entitlements should be examined. Reform of the welfare state was an issue throughout the euro zone. He argued that the need for adjustments to pension, health and unemployment benefit schemes was obvious.

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