Troika says bailout 'on track'

The EU-IMF bailout programme for Ireland is "on track" but there is still a long journey ahead and both domestic and international risks, the troika has warned.

In its fourth review of the programme, the troika of the EU Commission, the European Central Bank and the International Monetary Fund said that the domestic economy was still weak and unemployment was "unacceptably high".

"Ireland is not yet out of the woods and it will be a long journey, said Commission official Istvan Szekely.

But he added that the Government was making progressing on the programme.
"It is going to take a lot of sacrifices on everyone's part to finish the journey," he said at a press conference in Dublin.

The troika would not be drawn on whether the Government needs to seek savings beyond €3.6 billion in the December budget to reach a deficit target of 8.6 per cent next year.

They had looked at the "menus" of possible decisions that could be taken in the budget to reduce the deficit but it was a matter for the Government as to how to reach the target, the troika said.

Mr Szekely said that in relation to the Croke Park agreement on the public sector, this was an area where the troika expected additional savings.

IMF deputy director Ajai Chopra said that the programme was progressing well but that it would take time for growth to return to the home economy and for uncertainty in the euro zone to reduce. The return of domestic economic growth will "take some time", he said, and that there needed to be patience.

There were no areas of concern among the troika about the programme, he said, but warned that there were "downside risks".

Dampening international growth would have implications for Ireland's strong exports, he said.

Domestically, the deleveraging of household debt and rising mortgage arrears were risks but there was a big debate ongoing on how to address this problem. This was not just an issue for creditors but "a social issue", he said.

The Government was addressing household indebtedness in "a very sensible way" by looking at reforming personal insolvency law, including measures for out-of-court debt settlements, said Dr Chopra.

He said the troika may have underestimated the fiscal drag and the effect of emigration on taxes and "human capital" in the country. "Ireland is doing the rights things on what it can control," he said.

Mr Szekely said that the problem of youth unemployment is an issue that the troika would have to return to. "No one wants a lost generation," he said.

Ireland was "best positioned" to avail of any changes at a European level to the use of the EU bailout fund, he said.

Dr Chopra said that the banks needed to improve transparency and recognise losses within accounting rules and to be more "forward-looking" on this issue. The troika said that further reforms were necessary to make the pharmacy sector, and the medical and the legal profession more competitive for consumers.

"We want to make the consumer the king and we are close to the coronation here," said Mr Szekely.

He said that in Brussels, where he lives, it costs half what it does in Ireland to visit a GP.

The troika said that there was no deadline for the privatisation of State assets.