Following a careful and thorough assessment of all of the available options, and following a broad consultation process, the Irish Government has decided that Ireland will exit the EU/IMF programme in December as planned and without a pre-arranged precautionary credit facility.
The Irish Government’s assessment is that the best option for Ireland is to exit the programme as planned in December without a pre-arranged backstop for a number of reasons, including:
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The market and sovereign conditions are favourable towards Ireland with the country returning to the markets in 2012, holding over €20 billion in cash reserves at year end which we can use to ensure that we can meet our maturing committments and funding costs till early 2015 and Irish sovereign bond yields at historically low levels.
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The public finances are under control in Ireland comfortably in line with EDP targets. Ireland is targeting a deficit of 4.8 per cent in 2014 which is within the 5.1 per cent EDP target and will deliver a primary balance or small surplus. The Government is committed to reducing the deficit to less than 3 per cent in 2015 and putting the debt ratio on a downward path.
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The two pack, the six pack and the stability treaty, the introduction of the ESM, and the major efforts by the ECB to do whatever it takes to safeguard the currency, further support our efforts to make a sustainable and durable return to the markets.
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Domestic and international economic conditions are improving, monetary policy decisions are conducive to exit and confidence and sentiment towards Ireland has improved considerably in recent months.
Press release
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Prime minister Enda Kenny said it was the right decision at the right time for his country. "This is the latest in a series of steps to return Ireland to normal economic, budgetary and funding conditions... We still have a long way to travel but clearly we are moving the right direction", Kenny told parliament.
Finance minister Michael Noonan said he welcomed the sense of economic independence the decision brings after three years of being under the stewardship of the troika. He did note, however, that the international experts who worked on Ireland were "good people" and that history would show they had helped the country. "We spent an awful lot of time to get our freedom and get the authority to run our own affairs", Noonan said. "There's not much point in having political freedom if you don't have economic and financial freedom", he said, adding that the goal now was to build a strong job creation rate in Ireland.
Noonan warned that his country's "finely balanced" choice to leave its bailout without additional financial assistance didn't set a precedent for the other eurozone nations still under bailout programmes. "All the programmes have been country-specific and the conditions attached are country-specific...Any other country, like Portugal for example who'll be next in line for exit...they could weigh the arguments on both sides [and] decide it was finely balanced to go for a precautionary programme", he said.
He added that he had no reason to believe that stress tests of Irish banks in 2014 would throw up fresh capital needs that could destabilise the country's financial situation anew. "Irish property prices have been increasing now since June, so the value of the collateral underpinning the loans in Ireland has been increasing in value. So, as each month goes by, it seems to me there'll be less and less likelihood of any additional capital requirements", Noonan said.
Noonan also said the ECB's decision to cut interest rates last week was one of the final triggers for the decision and that he was very confident it was the right one.
Further reporting © Reuters / WSJ
The German government welcomes the decision of the Irish government. It would like partners within the eurozone to continue to support Ireland in its efforts to achieve stability, employment and growth even after 15 December.
Germany and Ireland have agreed on an initiative. Together they aim to improve financing for the real economy. Ireland’s small and medium enterprises too are to gain easier access to financing. The Kreditanstalt für Wiederaufbau will launch cooperation with the Irish authorities without delay so as to achieve concrete results as swiftly as possible.
Financial support for Ireland
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Financial support for Ireland totals €67.5 billion.
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EFSF (European Financial Stability Facility), EFSM (European Financial Stabilisation Mechanism) and IMF (International Monetary Fund) have together put up €62.7 billion.
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The United Kingdom, Sweden and Denmark have together provided €4.8 billion in bilateral loans.
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When the 11th programme review is completed €66 billion will have been paid out to Ireland.
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Ireland itself has contributed €17.4 billion to the programme from cash reserves and the national pension fund.
Full statement
© An Roinn Airgeadais (Irish Department of Finance)
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