Extra efforts to get the unemployed back to work are required, according to the EU/IMF troika after its latest visit to Ireland.
The troika also says that strict implementation of this year’s budget is essential to keep the country on track to exit the bailout.
In a statement yesterday on its 10th review of the implementation of the bailout programme, the troika said significant progress had been made but remaining challenges required continuing policy efforts.
In particular, the troika highlighted the need for enhanced engagement with the unemployed and the opening up of competition in sheltered sectors like legal services.
Further improvements
"Ireland's programme remains on track, the gradual recovery is continuing and there have been further improvements in market conditions for the sovereign and the banks," said the statement following a visit to Ireland by the troika between April 23rd and May 2nd.
“The authorities have made significant progress on financial sector repair and restoring sustainability to the public finances, yet remaining challenges require continuing policy efforts,” said the troika, adding that its discussions with the Irish authorities had included preparations for the programme exit.
“Ireland’s economic recovery is continuing, with growth forecast at about 1 per cent in 2013 and just over 2 per cent in 2014. Weaker than anticipated economic activity in main trading partners is weighing on exports, but domestic demand is somewhat stronger than expected.”
The statement added that a 10-year benchmark bond was recently auctioned successfully and its yield had since declined to a low of about 3.5 per cent.
It said funding conditions for banks had also improved, with strong investor interest reflecting growing international confidence in Ireland’s steadfast policy implementation, and improvements in the sovereign’s debt service outlook stemming from recent European decisions.
“Sustaining Ireland’s fiscal performance is key to durable market financing. The 2012 fiscal target was comfortably met and the budget remained on track in the first quarter of 2013. The strict implementation of Budget 2013 measures, including in the health sector, is essential to meet the Government’s commitment to a 2013 deficit ceiling of 7.5 per cent of GDP.”
Mortgage arrears
The troika said the normalisation of the financial sector was gradually continuing with the smooth phase-out of the eligible liabilities guarantee scheme and that, after "a disappointingly slow start", banks were working towards meeting ambitious targets to ensure a durable reduction in mortgage arrears.
The statement said the Irish authorities would need to monitor this process closely.
The troika emphasised the unemployment problem, saying that while a pick-up in growth was needed to make a meaningful reduction, further policy efforts were important to address its increasingly structural nature.
