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Europe hails Ireland's "important progress" in financial recovery

The European Commission says Ireland’s economy will grow this year, albeit gradually, with the bank bailout cheaper than expected.

Olli Rehn's European Commission has praised Ireland for its progress in implementing the terms of the EU-IMF bailout.
Olli Rehn's European Commission has praised Ireland for its progress in implementing the terms of the EU-IMF bailout.
Image: Mark Stedman/Photocall Ireland

THE EUROPEAN COMMISSION has published its report on the latest review of Ireland’s bailout programme – heralding what it described as “important progress” in reforming the banking sector and government spending.

The report, published this lunchtime, said the cost of bailing out the banking sector was to be less than originally expected – and that Ireland would easily beat the EU’s target for keeping its Budget deficit within 10.6 per cent of GDP this year.

The Commission said it expected the economy to continue to grow this year – albeit at a ‘modest’ rate, given the difficulties with domestic demand – and that Ireland was also making good progress on removing restrictions on trade and competition in some sectors.

The cost of recapitalising the banks had been reduced by burden-sharing schemes and the moves to ensure private investment in Bank of Ireland, while the EC also noted that the merger of AIB with EBS, and of Anglo with Irish Nationwide, had been completed well ahead of schedule.

Real GDP is now expected to grow by 0.6 per cent, with the drop in public consumption now smaller than first anticipated, offsetting the extra fall in private consumption.

Exports are to grow by 6 per cent, the European Commission believes, while imports would grow by 3.2 per cent.

Unemployment, which was 14 per cent in the first quarter, had been below the expectations of the bailout programme – though the review did note that 55 per cent of those without work had been unemployed for over a year.

“There is a clear risk that the increasing long unemployment spells develop into structural unemployment. Limiting this risk requires considerable attention going forward,” the report said.

The report said the successful completion of the review meant Europe would now release the latest €5.5bn in bailout assistance, and affirmed that the bailout programme was still sufficient to finance Ireland until at least the second half of 2013.

The report was compiled based on a visit from a joint EU-IMF delegation to Dublin in mid-July.

The positive outcome of the review may bolster the government’s chances of securing a renegotiation of the bailout programme – with Enda Kenny admitting earlier this week that the troika’s permission would be needed if the government was to avoid increasing income tax.

PDF: the full European Commission report >

Read: Trichet: Ireland is gaining credibility and increasing creditworthiness >

More: IMF lowers expectations for Irish growth – but it’s not our fault >

Earlier: Kind words from IMF as new bailout loans are approved >

About the author:

Gavan Reilly

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