In a joint statement issued yesterday, the European Commission, European Central Bank and International Monetary Fund said Ireland had maintained its strong progress in implementing the conditions of the bailout. This had led to ‘substantial improvements’ in the government’s access to the financial markets, as well as a ‘moderate’ increase in its banks’ access.
The economic recovery is expected to gradually gain momentum, with 1% growth forecast for this year and more than 2% next year. The government ‘comfortably’ met its target of reducing the budget deficit last year to 8.6% of gross domestic product. It is now committed to lowering this to 7.5% this year and to 3% or less in 2015.
The statement noted, however, that ‘strict implementation’ of the austerity measures outlined in the 2013 budget was essential.
‘In particular, the government’s efforts to ensure stronger management of the health budget, where spending overruns occurred in 2012, must deliver high-quality health services while achieving value for money more in line with other European Union countries,’ it said.
‘A timely conclusion of the negotiations with public sector unions should allow savings to be achieved while protecting the delivery of core public services.’
The funders also noted the ‘stubbornly high’ unemployment, calling for more to be done to help the long-term jobless in particular.
Ireland’s successful review means it will now receive another €1bn from the IMF and €1.6bn from the eurozone’s bailout mechanisms. It is also in line for a further €0.5bn of bilateral loans from EU member states.
Yesterday, the government also received ECB approval for a deal that would enable it to stretch out and reduce repayments of the debt it incurred bailing out the former Anglo Irish Bank.
The bank, which became known as the Irish Bank Resolution Corporation after it was nationalised in 2009, will be liquidated and the debt, currently in the form of promissory notes, will be replaced by long-term Irish government bonds.
This means the government will not begin paying off the debt until 2038, compared with the current arrangement where it would have had to pay €3.1bn off a year from next March. The interest rate on the new bonds will also be 3%, rather than 8%.
Irish Prime Minister Enda Kenny said the process was a ‘historic step’ on Ireland’s road to economic recovery and would bring it closer to meeting the EU deficit reduction goals that are a condition of its bailout programme.
‘This will result in a reduction in the state's general government deficit of approximately €1bn per annum over the coming years, which will bring us €1bn closer to attaining our 3% deficit target by 2015. This means that the expenditure reductions and tax increases will be of the order of €1bn less to meet the 3% deficit target,’ he explained.
‘This plan will lead to a substantial improvement in the state's debt position over time,’ he added.
