* ECB board member says 'crucial' govt sticks to programme
* Does not see ESM retroactively recapitalising banks
DUBLIN, Sept 21 Ireland should not ease up on
austerity in its annual budget next month but stick to a target
of 3.1 billion euros ($4.2 billion) worth of spending cuts and
tax hikes, European Central Bank Executive Board member Joerg
Asmussen said on Saturday.
Ireland has beaten several targets under its bailout,
leading to calls by government ministers for a more modest
fiscal adjustment for next year than agreed with lenders the
European Union, International Monetary Fund and European Central
"I would really suggest to stick to the budget plan for the
next year and to stick to the figure of 3.1 billion" euros,
Asmussen said in an interview with Irish state broadcaster RTE.
"It is crucial the authorities stick to the programme's
objectives as they have done to ensure the country remains on a
sustainable path," he said.
Asmussen's comments echo those by the International Monetary
Fund in July when it called on the government to stick to the
Credit Ratings agency Moody's on Friday said the country
risked a ratings downgrade if its fiscal consolidation faltered.
Members of parliament have suggested cutting the fiscal
adjustment to between 2.5 and 2.8 billion euros, but the
government says no decision has been made.
Asmussen was upbeat about Ireland's growth prospects, saying
recent data supported expectations of a gradual recovery in
economic activity in the second half that would help ensure the
country exits its bailout on target by the end of the year.
He said the risk of additional recapitlaistion of Irish
banks due to mortgage arrears was not a particular concern.
But he also said he did not expect the government to be
successful in its bid to use the euro zone bailout fund, the
European Stability Mechanism (ESM), to retroactively
recapitalise the country's banks, possibly by buying shares.
Finance Minister Michael Noonan has said the government
plans to submit proposals to its European partners before the
end of the year on the use of the ESM to ease the burden of
Ireland's bank recapitlaistion.
"As I observe the situation as it stands currently, I would
not see a majority for the retroactive use of the ESM for direct
bank recapitalisation," Asmussen said. ($1 = 0.7402 euros)