* Senior minister speaks out against more austerity
* OECD recommends Ireland should beat fiscal targets
* PM insists there is no division in government
* C.bank warns banks on raising mortgage rates
* Credit Unions have provisions shortfall of around 300 mln
By Conor Humphries and Carmel Crimmins
DUBLIN, Oct 14 A fresh call for Ireland to ramp
up its austerity drive heaped pressure on Prime Minister Enda
Kenny's coalition government on Friday as he brokered
negotiations for his administration's first budget under an
Fissures have emerged in Kenny's cabinet over whether Dublin
needs to make adjustments above 3.6 billion euros ($4.9 billion)
next year to get the deficit, currently the worst in the
industrialised world, down to 8.6 percent of Gross Domestic
Product (GDP) from an estimated 10 percent this year.
Adding to the strain, the Paris-based Organisation for
Economic Cooperation and Development (OECD) said Dublin should
go beyond the 8.6 percent goal to help regain credibility among
investors spooked by a deepening euro zone debt crisis.
"I don't want us to go beyond the 3.6 billion (euro) cut we
have committed to," Energy Minister Pat Rabbitte told state
broadcaster RTE before the OECD report was published.
"It's very easy to rhyme off figures and say we will go for
more than planned," said Rabbitte, a senior member of junior
coalition partner, the Labour Party.
"You sit around a table with figures in front of you in
social welfare, in health, in education, in justice and see how
difficult it is."
Unlike Athens, Dublin has won international praise for
meeting its bailout goals and Kenny, who led his centre-right
Fine Gael party to a historic victory in March, is determined to
position Ireland as the first country to emerge from the
currency bloc's debt crisis.
But a weakening growth outlook for next year means Ireland
will likely have to go beyond 3.6 billion euros in spending cuts
and tax increases just to meet its existing target.
The worsening crisis in Greece, meanwhile, is putting
pressure on Dublin to do more to further distinguish itself from
Athens in the minds of investors.
"In terms of your international credibility it's always
better to overperform," Bob Ford, a senior OECD official said at
a news conference in Dublin.
"But if growth gets weak, it may be difficult to perform, so
to overperform might be too much to ask."
Kenny, who has been widely praised for his smooth working
relationship with his more left-wing Labour colleagues, told
state broadcaster RTE on Friday: "There isn't any division or
BREATHING DOWN THE BANKS' NECKS
Unlike fellow bailout candidates, Greece and Portugal, whose
economic problems are rooted in structurally weak economies,
Ireland's financial crisis was triggered by reckless lending by
A devastating property crash and subsequent recession has
sent mortgage arrears soaring and the country's central bank on
Friday warned lenders they needed to tackle the problem of
unsustainable debts quickly and fairly.
The central bank's deputy governor Matthew Elderfield
summoned the heads of Bank of Ireland , Allied Irish
Banks , permanent tsb and the EBS Building
Society to a meeting this week to tell them he would
be "breathing down their necks" over the arrears problem.
Banks risk enforcement action if they are not dealing with
arrears fairly, he said.
"There is a core group where the financial circumstances are
so dire they are going to lose ownership of their home and it is
unfair to postpone dealing with that group because in some cases
you are saddling them with more debt for the future," Elderfield
told state broadcaster RTE.
Banks will have to provide the central bank with a quarterly
report on the progress of their arrears strategy and Elderfield
said bank directors would have to take personal responsibility
for their arrears policies.
He also said the central bank may acquire the power to cap
mortgage rates if banks did not stop hiking variable mortgage
rates, some of which are as high as 6 percent compared to a
European Central Bank base rate of 1.5 percent.
"It seems in many cases the banks are using variable rate
increases as a way to compensate for a lack of profitability on
their tracker books and that doesn't make sense to me in terms
of fairness, but also from a practical matter that it is making
the arrears problem worse," Elderfield said.
"I am saying to the banks that they are courting a policy
response to cap their rates if they persist in doing this."
After recapitalising its banks, Ireland's government has
said it will also recapitalise the credit union sector,
community-based savings and lending clubs, by up to 1 billion
A government-commissioned report on Friday showed that the
country's 409 credit unions had a provisions shortfall of around
300 million euros after arrears nearly doubled in the space of
Professor Donal McKillop, who wrote the report, said the
credit unions may need less than 1 billion euros in extra
capital unless conditions worsened.