07 February 2013

Statement by the EC, ECB and IMF on the Review Mission to Ireland

The government is estimated to have comfortably met the 2012 fiscal targets and it remains committed to a 2013 deficit ceiling of 7.5 per cent of GDP and to correcting the excessive deficit by 2015. Market confidence in Ireland’s continued solid fiscal consolidation is essential for the country’s durable return to market financing, making the strict implementation of Budget 2013 measures 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 EU countries. A timely conclusion of the negotiations with public sector unions should allow savings to be achieved while protecting the delivery of core public services.

Good progress has been made in repairing Ireland's financial sector, which should permit the timely removal of the costly Eligible Liabilities Guarantee scheme, improving banks’ profitability. Nonetheless, decisive actions remain essential to ensure banks’ capacity to lend and support the recovery. The priority in 2013 must be for banks to make demonstrable progress in enhancing asset quality. The management of mortgage and SME loans in arrears needs to be further enhanced to achieve sustainability for households and distressed but viable businesses. Given the scale of mortgage arrears, supervisers should ensure that banks intensify their engagement with customers in order to find durable solutions appropriate to borrowers' circumstances. Timely activation of the new personal insolvency framework will support these efforts. As a complementary step, greater efforts can be made to pursue legal remedies for unsustainable investment-property related debts. Strengthened progress in resolving SME loan arrears is also important given the key role of this sector in job creation.

Market conditions for Irish bonds continue to improve, with benchmark 8-year yields now below 4.5 per cent and recent bond issues attracting broad investor interest. There have also been encouraging improvements in financing conditions for banks and semi-state utilities. The significant yield declines on Irish sovereign debt reflect growing international confidence in Ireland’s robust policy implementation, as well as the euro area leaders' statement on June 29 and the ECB's announcement of Outright Monetary Transactions in early September. But market confidence remains vulnerable given high public and private debts and the mission teams stressed the need for continued strong policy efforts by the Irish authorities in order to lay solid foundations for successful programme exit at end 2013 and a durable return to market financing.

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Commission press release

Welcoming the successful conclusion of the 9th review mission, Ireland's Minister Noonan and Minister Howlin stated: “We are pleased to confirm that Ireland has successfully completed the 9th Review Mission and we continue to meet all of our targets. The completion of the Q4 2012 programme conditions brings to over 190 the number of commitments that have been fulfilled on time and we have now drawn down some 84 per cent of the available funding. Throughout the course of the review we have demonstrated significant progress on delivering on our commitments but we do not underestimate the significant challenges that remain. Our focus is now firmly on our exit strategy from the Programme, our re-entry into the financial markets and the debt sustainability of the Programme." 

Press release

See also Motion by Irish Government in relation to Promissory  Notes, 13.2.13

In his statement, VP Rehn said: "I welcome today's successful conclusion of the ninth review mission to Ireland. The mission has found that the programme remains on track and that the budgetary targets for 2012 look set to be comfortably met. The government's strong determination to meet its fiscal targets has been crucial to rebuilding confidence in Ireland's economy.

Ireland has made good progress to consolidate its public finances and recover much of the competitiveness that was lost in the boom years. After a deep recession, the Irish economy has been growing since 2011 and we expect its expansion to gradually become more robust later this year and in 2014. Significant progress has also been made in repairing the financial sector, though more needs to be done to enable banks to revive productive lending to the economy. Another key priority is to tackle unemployment, not least by strengthening employment services and accelerating the implementation of key investment projects, including those co-financed by the European Investment Bank.

Market conditions for Irish bonds have been steadily improving and confidence growing. Ireland is on track to exit from the EU-IMF programme as planned. The Commission stands by Ireland and its people and supports them in this objective. In this context, the major steps taken by the Irish authorities regarding the Promissory Notes should further boost confidence and help to facilitate a successful outcome."

Press release

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