DUBLIN, July 26 Any slippage in Ireland's
austerity targets "would not be well received" by those deciding
whether to offer Dublin a post-bailout credit line, the head of
the euro zone's rescue fund said in an interview with the Irish
Times on Friday.
Klaus Regling also said he did not think the European
Stability Mechanism (ESM) fund could take loss-making tracker
mortgages off the books of Irish banks, a move the Irish
government says would speed lenders' return to profitability.
Ireland is widely expected to become the first euro zone
country to exit a bailout programme later this year.
But government ministers have hinted in recent months that
the country might ease up on its plans for tax hikes and
spending cuts worth 3.1 billion euros in an October budget.
Regling told the paper that Ireland's EU-IMF lenders had
made "very clear that another 3.1 billion euro fiscal adjustment
... is the important next step."
But Regling demurred on whether that target was a
precondition for any precautionary credit line, a backstop the
Irish government is considering asking euro zone leaders to
grant to ease its exit from the bailout.
"I don't know what the conditions would be, but if the
agreed target were not reached I'm sure that would not be well
received," Regling said.
Asked whether the ESM could take on loss-making tracker
mortgages, which were granted during the boom at low interest
rates and are dragging down Irish lenders, Regling said it would
not be possible under current rules.
"That instrument doesn't exist at all for the ESM. And I
don't see an appetite among the euro area countries to create a
new instrument," he said.