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Brussels, 9 September 2011
Results of the third Review Mission show Ireland well on track
European Commission has completed the third review of the EU/IMF supported financial assistance programme for Ireland. The joint European Commission/ECB/IMF mission was in Dublin during 6-15 July 2011. Important progress has been made in the areas of fiscal consolidation, strengthening of the domestic financial sector and growth-enhancing structural reforms, in line with the Council Implementing Decision 2011/77/EU. The third instalment of €5.5 billion is planned to be disbursed to Ireland in two tranches, by end-September and end-October.
Review results show a gradual return to positive growth in 2011. Strong exports - aided by improvement of competitiveness - drive the recovery. The programme remains on track and is well financed. Fiscal performance so far this year has been satisfactory and the budget deficit for 2011 as a whole is now projected to be well below the 10½ percent of GDP programme ceiling. The Government has established the Irish Fiscal Advisory Council to provide an independent assessment of public finances.
Important reforms are also being implemented to restore the healthy functioning of the banking sector. In particular, the recapitalisation of the domestic banks has been completed. The budgetary costs are significantly lower than originally anticipated, thanks to burden sharing with subordinated debt holders and a sizable infusion of private capital into one of the two pillar banks. Banks are also making progress towards the agreed deleveraging targets reducing the size of their balance sheets. Two planned mergers (of Allied Irish Banks with EBS Building Society and of Anglo Irish Bank with INBS) have been completed ahead of schedule, and bank boards are being renewed.
Structural reforms are also being advanced. To improve the functioning of the labour market and enhance job creation, the government is working with the social partners to reform the framework of sectoral labour market agreements, covering sectors where unemployment tends to be high. Progress has also been made in removing restrictions on trade and competition in sheltered sectors (e.g., legal profession, medical services, pharmacy profession) in order to lower costs and boost purchasing power.
The determination of the government to fully implement the programme and the July 21 announcements, have enabled a noticeable reduction of yields on Irish sovereign bonds on the secondary markets in recent weeks.
Looking ahead, the Commission welcomes the authorities' intention to publish a medium term fiscal consolidation plan for 2012 to 2015 outlining the changes they want to introduce to the medium-term fiscal adjustment strategy with a deficit target of below 3 percent of GDP in 2015. An early specification of the plans and supporting measures would help sustain the recent improvements in market sentiment towards Ireland.
The mission for the next programme review is scheduled for October 2011.