Troika happy bailout remains on track

Fri, Apr 27, 2012, 01:00

PROGRESS REPORT:IRELAND’S BAILOUT remains “on track” and the Government’s implementation of its terms has been “strong”, according to the staff teams from the European Commission, the European Central Bank, and International Monetary Fund.

On the basis of their assessment, both the commission and the IMF teams will advise their respective organisation to release the next tranche of funding to the Government.

The troika statement said that “considerable challenges remain” and that a recovery in the economy’s fortunes depended partly on what happens internationally.

No progress was made on restructuring the €30 billion worth of promissory notes, with the troika only saying that “technical discussions” were ongoing.

The three teams arrived in Dublin on April 17th to conduct the sixth quarterly review of the Government’s economic programme. They concluded their mission yesterday.

The joint statement of the three teams noted that market confidence in Ireland’s policies had improved, as reflected in some stabilisation in Irish government bond yields, although the troika said that they remained elevated.

Budgetary targets for 2011 were met “with a healthy margin”, the statement noted, and progress was maintained into the first quarter of 2012, reflecting “the authorities’ prudent budget design and implementation”.

The statement went on say that the budget was on track for achieving the 2012 deficit ceiling of 8.6 per cent of GDP.

While not explicitly endorsing the Government’s Pathways to Work strategy and its Action Plan for Jobs, both published in recent months, the troika said in relation to job-creation that “progress in this area is essential to bring down the high level of unemployment”.

The reform of Ireland’s outdated personal insolvency laws “will further facilitate the resolution of unsustainable debts”, the troika said, noting that authorities were “taking care to balance the rights of debtors and creditors and uphold Ireland’s tradition of debt-servicing discipline”.

Of the problems that remain in the banking sector, they pointed to mortgages and loans to small and medium-sized companies that are in arrears as problem areas.

Economic growth is expected to remain modest in 2012 at about 0.5 per cent. Unlike most previous quarterly reviews, however, the troika did not revise its GDP forecast down from the last forecast three months ago.

The commission is due to distribute €2.3 billion over the next quarter, while the IMF is scheduled to contribute €1.4 billion. When both sums are made available, the total support to the Government will have reached €45 billion of a €67.5 billion programme.

Breaking with previous missions, the teams did not meet with Opposition parties and did not hold a concluding press conference. IMF team leader Craig Beaumont held a separate telephone press conference. When asked he declined to comment on why a joint briefing was not held.

During the conference call Mr Beaumont commented that “if growth remains sluggish the debt dynamics could trend upwards over time”.