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Finance Minister Jim Flaherty (BRENDAN MCDERMID)
Finance Minister Jim Flaherty (BRENDAN MCDERMID)

Flaherty lauds Irish fiscal reforms Add to ...

Finance Minister Jim Flaherty said Ireland had a solid bank plan and was Europe's leader in fiscal reform, warning not to take rating agency views such as S&P's downgrade of Ireland this week too seriously.

Dublin will welcome G7 chair Canada's defence of its "bad bank" plan and efforts to stem the rise in its budget deficit after S&P on Tuesday cut Ireland's credit rating to "AA-", pushing up its borrowing costs.

"Ireland certainly has led the European Union in taking the necessary courageous decisions toward fiscal consolidation," Mr. Flaherty told Irish public radio RTE in an interview during a visit to Dublin.

Ottawa is in a better position to talk about public finances than its peers, a strength S&P acknowledged when it affirmed Canada's top "AAA" rating in April.

A junior minister in Ireland's finance ministry on Thursday reiterated Dublin's criticism of S&P's method in accounting for its bank rescue costs.

"We have taken such issue with the judgement of Standard & Poor's ... quite publicly, which is unusual for a government, to show that the fundamentals of our economy are still strong," Minister of State Dara Calleary told RTE.

He said Dublin could reach an agreement with the European Commission in weeks on the fate of nationalized Anglo Irish Bank, which would help ease the uncertainty that has pushed up Ireland's borrowing costs this month.

Markets will not get a full picture of Ireland's bank recapitalization costs before the end of 2010 however, when banks will have transferred the bulk of their shaky property development loans to the state's "bad bank" vehicle.

Canada, which also chaired the G20 group's summit in June, last month proposed new regulations for credit rating agencies to boost investor confidence and prevent conflicts of interest.

"You know, the rating agencies, quite frankly, were part of the problem that caused the crisis," Mr. Flaherty said. "I'm not a big fan of Moody's and Standard & Poor's and so on when they start to pontificate on certain issues," Mr. Flaherty said.

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