A REVIEW of the Croke Park agreement this autumn, which was hinted at in the original bailout deal late last year, now appears to be off the agenda.

In an update on the progress of the Government in meeting the terms of the EU-IMF bailout, the European Commission said it believed public sector reform was advancing, stating that “planned reductions in public service numbers are in line with targets and measures to reduce the overall public service wage bill have strong support from both Government and unions”.

The comments come in a report from the European Commission that is positive overall.

The commission is one of a troika of institutions – along with the European Central Bank and the International Monetary Fund – which oversees the implementation of the terms of Ireland’s EU-IMF bailout. The assessment echoes in most respects a similar exercise published by the IMF on Wednesday.

Unlike the IMF report, the commission does not make any specific recommendations on the amount the Government should seek to raise from privatising State assets.

Although not an obligation, the IMF “urged” the Government to raise €5 billion, more than twice the €2 billion figure contained in the programme for government.

It describes the economic recovery as “timid” but expects gross domestic product (GDP) to expand in 2011, the first year of growth since 2007. It has not revised its forecast, of 0.6 per cent growth, unlike the IMF, which pared its forecast back to 0.4 per cent.

The commission has also maintained its growth forecast for 2012, at a relatively robust 1.9 per cent. The IMF had agreed with that assessment up to the end of August, but then lowered its 2012 growth projection to 1.5 per cent on the basis of weaker than previously anticipated export growth.

The report is positive about progress in rebalancing the public finances, saying “the government deficit for 2011 as a whole is projected to be well below the 10.6 per cent of GDP programme ceiling”. Its new forecast is for a deficit of 10.2 per cent of GDP this year falling to 8.6 per cent next year.

As debt-servicing costs are rising in line with the growing stock of debt, interest payments next year are expected to account for more than half of the total budget deficit, at 4.6 per cent of GDP.

On rebuilding the banking system, the report says that “the authorities have begun implementing their financial sector strategy in earnest, securing significant progress towards the recapitalisation, restructuring and deleveraging objectives of the programme”.

They also noted, however, that the implementation of the reform of the Irish financial sector, the collapse of which forced Dublin to seek emergency lending from the EU and the IMF, would continue to be challenging in the near term.

“The deleveraging of non-core assets is expected to accelerate, helped by an apparently stronger than previously expected demand for assets held abroad by the Irish banks,” the report said.

“The restructuring of the domestic banks, which is well under way, has to continue with the ultimate goal of restoring a viable banking sector capable of serving the Irish economy by providing a wide range of products at competitive conditions,” it said.

Strong export growth is attributed to “productivity improvements stemming from the sharp fall in employment and the reductions in both hours worked and hourly labour costs”.

However, it goes on to say that “hourly earnings contracted by only 0.1 per cent in the year to the first quarter, suggestive of some rigidities in the labour market”.