The Government has met all the fiscal targets in the bailout programme agreed with the troika of international lenders. However, it has not yet met some other key objectives the three-year programme has also set - a matter that concerns the team of inspectors from the European Commission, European Central Bank, and International Monetary Fund. The inspectors have just returned to Dublin on their twelfth - and final - mission to complete their report before the programme expires in mid-December.
Then Ireland expects to resume normal market funding of its sovereign borrowing needs. And certainly, it is well placed to do, as the State’s 10-year borrowing costs have dropped sharply - down from over 14 per cent in July 2011 to 3.5 per cent this week. But financial markets, while becalmed for now, have been volatile and market sentiment can be fickle. Nevertheless, Ireland can make a successful transition to becoming once again a market participant, and thereby enjoying a greater measure of economic independence.
The troika’s worry is that the Government may be wasting the opportunity that any financial crisis presents, namely to achieve necessary and long overdue reforms in key areas. In this respect, the Government has made haste slowly, with unexplained delays on reform of the legal sector (barristers and solicitors) to ensure lower legal costs. There legislation, which was first introduced in 2011 to regulate the lawyers, has yet to complete committee stage discussion. Likewise, we have seen a slow delivery of welfare reforms to boost employment; little sign of a clear resolution of the banks’ difficulties - not least in addressing the growing problem of mortgage arrears; and scant evidence of a significant reduction in the State’s pharmaceutical bill that the bailout programme prescribed.
One concern must be that with the troika’s departure, there will be less external oversight and pressure for reform in these areas. And, with the coalition parties facing mid-term elections, at local and European level, next year it will be harder for the Government to do later what it should have done sooner - take tough political decisions. The Government may well be suffering from reform fatigue, but it has promises to keep in order to achieve long over due and much needed reforms. These promises should be kept, as the troika inspectors will no doubt insist. The Government cannot afford to receive a failure mark from the troika for its performance on the reform agenda, just as it exits the bailout programme. And, should the Government ultimately decide it does after all need a precautionary credit line to reassure sovereign lenders next year, then the conditions attaching to that credit facility are likely to be more onerous if the Government has just failed the reform agenda test.