17 September 2012

Ireland: Commission gives green light for €1 billion disbursement and publishes staff working paper on EU-IMF programme

The Commission has completed the seventh review of the EU-IMF programme for Ireland and the Commission services have published a working paper assessing programme implementation as well as prospects and risks. This would bring total EU funding disbursed to Ireland so far to approximately €36.6 billion (€33.8 billion from the EFSM/EFSF; €2.8 billion from bilateral EU donors) since the launch of the programme in late 2010.

The Commission services' working paper notes that the strong track record of policy implementation continues in Ireland, despite a challenging domestic and external backdrop. The fiscal deficit for 2012 is projected to be within the programme ceiling of 8.6 per cent, continued progress is being made in repairing the country's banking system so that it can support the economy, and important structural reforms are being implemented.

Reflecting this strong performance - and the 29th June statement from euro area Heads of State and Government, recognising the imperative of severing the vicious circle between banks and sovereigns and mandating the Eurogroup to examine the situation of the Irish financial sector with a view to enhancing the sustainability of the well-performing programme - market sentiment towards Ireland has improved significantly in recent months, as attested by a marked decline in Irish bond yields, enabling Ireland's successful return to bond markets over the summer. Notwithstanding these achievements, significant challenges lie ahead for the Irish economy. These include the still large fiscal deficit, the country's high and increasingly long-term unemployment rate, and the high private sector debt overhang.

The working paper acknowledges that the programme's ultimate success remains subject to important risks, including continued uncertainties in the outlook for trading partners' growth – and the impact of these uncertainties on the fiscal path – and the complexity of the ongoing financial sector reforms in a context of strong sovereign-banking links.

Press release

Commission Review

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