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News : Irish Economy Last Updated: Jul 13, 2012 - 7:36 AM

Ireland meets Troika's bailout targets
By Finfacts Team
Jul 12, 2012 - 4:51 PM

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Ajai Chopra, deputy head, IMF's European Department and head of the Troika -- - - EU Commission, the ECB and the IMF - - with responsibility for the Irish bailout.

The Government said today that Ireland has successfully concluded the seventh review of the Programme of Assistance (the bailout) with the so-called Troika - - EU Commission, the ECB and the IMF. In line with each of the previous six quarterly reviews, Ireland has continued to achieve all of the targets set under the programme.

The Troika said in a statement today: 'Despite the weakening external environment and higher unemployment, strong collection efforts have brought in revenues ahead of profile. However, Ireland's budget deficit remains the largest in the euro area, and it is essential that the authorities maintain prudent control of expenditure, including in health care. The result of the end-May referendum enables ratification of the Treaty on Stability, Coordination and Governance, and forthcoming legislation to implement the Treaty will strengthen Ireland’s fiscal framework.

Ireland’s unemployment remains unacceptably high and generating growth and jobs on a sustainable basis remains a critical priority. Accordingly, the authorities are considering plans to utilize the enhanced European Investment Bank resources in a range of sectors including education, transport and health care. The introduction of pilots to more actively engage with the unemployed under the Pathways to Work program is encouraging. Strengthening the provision of activation services, especially for the long-term unemployed, is critical.'

Michael Noonan, minister for finance, said the Budget would be held in the first week of December and a little over €2bn of the €3.5bn savings target would come from expenditure cuts, with a further €1bn plus coming from tax increases and other revenues. 

He said the Budget would be helped by a tax carryover from 2012. 

Noonan said reducing the burden of bank debt was essential if the economy was to recover and repaying the interest on the loans would result in a drag on growth rates.

He said he was confident that the 2015 deficit target of 3% of GDP will be achieved - -  but he would say that, even though current growth forecasts for 2014 and 2015 are too high.

The following are agreed steps to be taken in the coming three months:

Structural Reform

  • An indicative timetable for asset sales is in place. The Government will provide progress reports in the next two quarters on the steps being taken to prepare for asset sales to commence in 2013.
  • To help tackle the high and persistent rate of long-term unemployment the Department of Social Protection will continue to build on progress so far in enhancing our labour market activation services. The Department will take steps to
  • increase the number of unemployed referred to training courses and employment supports in order to reduce the risk of long-term unemployment,
  • o       improve the ratio of vacancies filled off the live register, and
  • o       ensure engagement with employment services as a pre-condition for receipt of jobseeker payments.
  • Measures to address the emerging spending overruns in the health sector are to be specified before the end of September 2012.
  • The Industrial Relations (Amendment) Bill 2011 will be further advanced through the legislative process by end-September 2012.
  • A report on the impact of labour market reforms to sectoral wage-setting mechanisms undertaken under the programme is to be provided by end-June 2013.
  • The Department of the Environment, Community and Local Government and the Department of Social Protection will report on housing assistance reform, in particular on the introduction of the new Housing Assistance Payment. The Department of the Environment, Community and Local Government will also report in September 2012 on progress towards the transfer of water services provision from local authorities to Irish Water and the roll-out of a domestic water metering programme.

Financial Sector Reform

  • The Troika noted the progress made in relation to the reduction of ELG exposure and that the State intends to continue to work with the banks to reduce this contingent liability. This is also an important issue for the international markets’ investors and will help the State back to the bond market.
  • The banks’ deleveraging is in line with or slightly exceeding forecasts and will be assessed against the existing nominal targets for disposal and run-off of non-core assets in line with the 2011 Financial Measures Programme.  Fire sales and excessive deleveraging of core portfolios will be avoided so as not to impair the flow of credit to the economy.
  • The loan to deposit ratio (LDR) will be replaced with a Net Stable Funding Requirement benchmark. This will help alleviate some of the pricing pressures on the deposit market, and allow the banks to adopt a broader perspective on their funding base.
  • PTSB’s restructuring plan continues to be developed and progress will be made over the coming quarter.
  • Draft guidance for the creation and subsequent holding of liquidity buffers will be established once the Capital Requirements Directive is finalized.
  • Specific features of the methodology for capital assessment will be agreed by the end of March 2013.

Fiscal Reporting

The ongoing process of enhancing fiscal reporting has been formalized in the programme.

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