Irish financial system can withstand ‘cliff-edge’ Brexit

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Ireland is seen as the EU member state most vulnerable to the threat of an unruly exit by Britain. Above, an Irish national flag, left, flies alongside a European Union (EU) flag in the centre of Dublin. (AFP)
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Ireland is seen as the EU member state most vulnerable to the threat of an unruly exit by Britain. Above, an Irish national flag, left, flies alongside a European Union (EU) flag atop of Government Buildings in Dublin, Ireland. (AFP)
Updated 17 January 2019
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Irish financial system can withstand ‘cliff-edge’ Brexit

  • Irish Central Bank Deputy Governor Ed Sibley: I am satisfied that from a financial stability perspective, these cliff-edge risks are now manageable
  • Ed Sibley: This is not to say that a hard Brexit will not be bumpy for the economy and for the financial system. Indeed, some level of market disruption would be inevitable

DUBLIN: The Irish financial system can cope with a hard Brexit — and the “most significant” firms are already implementing their contingency plans, Irish Central Bank Deputy Governor Ed Sibley said on Thursday.
Ireland is seen as the EU member state most vulnerable to the threat of an unruly exit by Britain, from the implications for its currently seamless border with the British province of Northern Ireland to the tightly intertwined trade with its nearest neighbor.
“I am satisfied that from a financial stability perspective, these cliff-edge risks are now manageable,” Sibley said in a speech.
“This is not to say that a hard Brexit will not be bumpy for the economy and for the financial system. Indeed, some level of market disruption would be inevitable,” he added.
But he said the financial system could withstand such turmoil.
“The Irish banking system is considerably more resilient than it was, and the most significant firms operating in Ireland across all sectors have, in line with our requirements, prepared and are executing contingency plans for a hard Brexit.”
Sibley added that the risks to Irish consumers from Britain crashing out of the EU in March without a deal are mitigated to the greatest extent possible, but that the central bank was conscious of some remaining risks to the detriment of consumers.
These include the closely connected Irish and British insurance markets that Sibley said had required the central bank and government to draft legislation to protect insurance customers in the event of a no deal Brexit.
While he said the vast majority of Britain- or Gibraltar-based firms have taken appropriate action to ensure they can continue to provide service to Irish consumers, the draft legislation provides for a temporary run-off regime allowing those without appropriate plans to service existing contracts for three years.
The legislation will not allow these firms to write new business, including the renewal of existing policies, and Sibley cautioned that even with the mitigation, the supply of niche insurance products may reduce or end altogether, given the potential increased costs and frictions.
Separately on Thursday, the Motor Insurers’ Bureau of Ireland (MIBI) told road users that their vehicles will need a Green Card to cross the border into Northern Ireland or travel to Britain if it leaves the EU without a deal or some kind of transitional arrangement.
Currently all Irish vehicles can travel seamlessly through Northern Ireland, but MIBI warned motorists that they should contact their insurer or insurance broker one month in advance to ensure they receive the documentation in enough time if the prospect of Britain crashing out of the EU on March 29 remains.


No need for more talks over draft budget: Lebanon finance minister

Updated 21 May 2019
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No need for more talks over draft budget: Lebanon finance minister

  • Lebanon’s proposed austerity budget may please international lenders but it could enrage sectors of society
  • Lebanon has one of the world’s heaviest public debt burdens at 150 percent of GDP

BEIRUT: Lebanon’s finance minister said on Tuesday there was no need for more talks over the 2019 draft budget, seen as a vital test of the government’s will to reform, although the foreign minister signalled the debate may go on.
The cabinet says the budget will reduce the deficit to 7.6% of gross domestic product (GDP) from last year’s 11.2%. Lebanon has one of the world’s heaviest public debt burdens at 150% of GDP.
“There is no longer need for too much talking or anything that calls for delay. I have presented all the numbers in their final form,” Finance Minister Ali Hassan Khalil said.
But Foreign Minister Gebran Bassil suggested the debate may go on, telling reporters: “The budget is done when it’s done.”
While Lebanon has dragged its feet on reforms for years, its sectarian leaders appear more serious this time, warning of a catastrophe if there is no serious action. Their plans have triggered protests and strikes by state workers and army retirees worried about their pensions.
President Michel Aoun on Tuesday repeated his call for Lebanese to sacrifice “a little“: “(If) we want to hold onto all privileges without sacrifice, we will lose them all.”
“We import from abroad, we don’t produce anything ... So what we did was necessary and the citizens won’t realize its importance until after they feel its positive results soon,” Aoun said, noting Lebanon’s $80 billion debt mountain.
A draft of the budget seen by Reuters included a three-year freeze on all forms of hiring and a cap on bonus and overtime benefits.
It also includes a 2% levy on imports including refined oil products and excluding medicine and primary inputs for agriculture and industry, said Youssef Finianos, minister of public works and transport.
“DEVIL IN THE DETAIL“
Marwan Mikhael, head of research at Blominvest Bank, said investors would welcome the additional efforts in the latest draft to cut the deficit.
“There will be some who claim it is not good because they were hit by the decline in spending or increased taxes, but it should be well viewed by the international community,” he said.
Jason Tuvey, senior emerging markets economist at Capital Economics, said: “The numbers will be of some comfort to investors, but the devil will be in the detail.”
“Even if the authorities do manage to rein in the deficit, it probably won’t be enough to stabilize the debt ratio and some form of restructuring looks increasingly likely over the next couple of years,” Tuvey said.
The government said in January it was committed to paying all maturing debt and interest payments on the predetermined dates.
Lebanon’s main expenses are a bloated public sector, interest payments on public debt and transfers to the loss-making power generator, for which a reform plan was approved in April. The state is riddled with corruption and waste.
Serious reforms should help Lebanon tap into some $11 billion of project financing pledged at a Paris donors’ conference last year.
Once approved by cabinet, the draft budget must be debated and passed by parliament. While no specific timetable is in place for those steps, Aoun has previously said he wants the budget approved by parliament by the end of May.
On Monday, veterans fearing cuts to their pensions and benefits burned tires outside the parliament building where the cabinet met. Police used water cannon to drive them back.