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Troika: Irish programme is succeeding but challenges ahead

Following a 10-day assessment of Ireland’s rescue package, the European Central Bank, European Commission and International Monetary Fund remain upbeat on the economy’s future.

Szekely and Chopra.
Szekely and Chopra.
Image: Photocall Ireland

IN GIVING ITS positive assessment of Ireland’s bailout programme today, the troika warned that Ireland still faces many challenges ahead.

Following 10 days of assessment, officials from the European Commission, European Central Bank and International Monetary Fund said they expect the fiscal deficit limit of 10.5 per cent of GDP in 2011 to be met.

European Commission Director of Economic and Financial Affairs, Istvan Szekely said, “In a nutshell, the programme is succeeding but the country is not yet out of the woods.

There are challenges ahead, including getting people back to work and protecting the vulnerable.

Szekely added:

There is realistic targets and they are consistently met. This is something we would like to build on and get the markets to understand. If there will be any surprises, they will be on the upside and not the downside.”

In his opening statement, the EC official said programme implementation continues to be strong.

The authorities have completed the key initial phase of the comprehensive financial sector reforms launched in March. The fiscal deficit limit of 10.5 per cent of GDP in 2011 is expected to be met and important structural reforms are being put in place. These strong policy efforts have underpinned the decline in Irish sovereign spreads in recent months, together with improved EU financing terms.

Economic growth has been stronger than expected and the recapitalisation of the banking sector has been completed at a lower than expected cost to the budget, he said.

The IMF’s Ajai Chopra later added that there are a number of difficult steps to be taken on the banking front, as well as on the fiscal side.

“We need to be patient,” he said. “This is still year one of a three-year programme. We need to give the government time, as well as the economy time.”

Budget 2012

Following comments from Finance Minister Michael Noonan earlier, the EC official confirmed that “substantive” discussions took place between the Irish government and the troika about the upcoming budget.

“We talked about possible measures and saw menus of what could be done. We were looking to see if the measures are of high quality and fit into the overall goals of the programme,” added Szekely.

“No stone was left unturned and we tried to agree on yields of these various measures,” he explained. “It is up to Government to decide on the composition of the budget.”

The EC, ECB and IMF are on hand for advice on international best practice and to agree that the fiscal targets can be safely reached, said Szekely and Chopra.

On the Croke Park Agreement, Szekely said that it is in the troika’s interest to make sure the budget adjustment is widely distributed in the budget.

Again reiterating Noonan’s earlier remarks, the IMF’s Ajai Chopra said, “We work very well together.”

Asked about the current situation in Greece and possible haircuts on bailout loans, Chopra said the focus needs to be on Ireland and reducing “uncertainty” here.

The Government has been very clear that it is committed to paying its debt and honour guarantees. That is how the programme was designed.”

Szekely also said that there are shared views on important parameters in the rescue programme.

Earlier today, Noonan committed to reaching the 8.6 per cent of GDP deficit target this year. To do so, there will be at least a €3.6 billion adjustment needed in the upcoming budget.

The next review mission is scheduled for January 2012.

Read: Govt says third review of Irish rescue programme was “successful”>

More: The full statement by the EU, ECB and IMF>

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