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Brussels, 22 April 2013
Commission concludes ninth review of Irish programme
The European Commission has completed its ninth review of the EU-IMF financial assistance programme for Ireland and has published the associated technical report. The completion of the review enables a disbursement of EUR 1.6 billion from the European Financial Stability Facility, bringing total available disbursements from the EU, IMF and bilateral partners to EUR 60 billion. This represents just under 90% of the total international assistance of EUR 67.5 billion available under the programme. Through EFSF/EFSM, the EU contributes some 60% of this funding.
The report highlights Ireland's continued strong record of programme compliance. At 7.6% of GDP, in 2012 the general government deficit was well within the programme ceiling. The 2013 Budget is consistent with the programme deficit ceiling for this year (7.5% of GDP). Other key reforms, such as the broadening of the tax base through the introduction of a Local Property Tax, remain on track. The replacement of the promissory notes with longer-dated government bonds following the liquidation of IBRC is expected to significantly reduce financing needs in the post-programme period and to improve the general government deficit and debt paths over time. As a result of the strong programme performance, there has been a significant steady improvement in market sentiment towards Ireland, culminating in the successful issuance of a new ten-year benchmark bond by the government, a key step towards durable market access. Banks have also been able to raise market funding secured on Irish assets, and should see their profitability improve following the removal of the Eligible Liabilities Guarantee scheme for new issuances from end-March.
The report also notes areas where further efforts are needed and a number of implementation risks going forward. Progress in resolving non-performing loans has been slow, and banks need to step up their efforts to find durable solutions for borrowers with unsustainable mortgage debts. The introduction of public targets for the banks to offer durable restructurings to customers in arrears is a welcome initiative and it is essential that the banks fully engage and find credible lasting solutions for distressed cooperative borrowers. At the same time, the commitment to remove legal impediments to the recovery of loan collateral as a last resort will, once implemented, help to restore a properly functioning mortgage market. On the fiscal side, it is essential that health overruns experienced last year are not repeated. From this perspective, the report underscores the importance of the dedicated monitoring system with enhanced reporting requirements which has been set up to track the implementation of health consolidation measures on a monthly basis. Also, a further adjustment of government expenditure, including in particular the public sector wage bill, is needed to keep fiscal consolidation on track. Finally, unemployment remains high, constituting an urgent policy priority. Emerging bottlenecks, especially in relation to the activation of the long-term unemployed, need to be tackled resolutely in the months ahead.
The next review mission to Ireland will begin on 23 April 2013.
The report is available on