Ireland clears penultimate EU/IMF test

The Republic of Ireland, which was bailed out by the European Union (EU) and the International Monetary Fund (IMF) in 2010, yesterday successfully completed the second-last review by its lenders, paving the way for a possible emergence from the bailout later this year.

"Ireland has successfully completed the 11th review mission and we continue to meet our targets," the country's finance department said in a statement.

After more than a week's assessment, the troika comprising the EU, the IMF and the European Central Bank (ECB) concluded that Ireland continues to meet its targets for cutting the budget deficit and strengthening its banking system.

"Further progress towards sustainable public finances is necessary to sustain improved funding conditions," a joint statement from the three monetary bodies said.

"Budget 2014 should bring the high debt and deficit down in line with Ireland's commitments and continue Ireland's track record of steady fiscal consolidation efforts," it further stated.

The Irish government believes that it can finance itself entirely from the global bond markets beginning next year.

The country entered the bond market in a limited way last year, after a gap of over three years and subsequently sold a benchmark 10-year bond in March.

Nevertheless, talks are in progress on the country's access to precautionary credit facilities from the lenders incase of an extreme exigency.

The Celtic nation became the victim of the US property bubble that burst in 2008 and the crisis peaked when its banking system collapsed in 2010, requiring a €85-billion rescue package from the global lenders.

So far, the country has drawn out about 91 per cent of the total bailout credit line.

In case of a successful exit, Ireland will become the first of the five troubled eurozone nations to come out of the emergency rescue. Other nations which have been bailed out since the onset of the eurozone crisis include Greece, Portugal and Spain and Cyprus.

However, Ireland has to ensure that it does not require a second bail out in the future. Uncertainties regarding the country's economic recovery remain the main risk factor for a successful emergence from the bailout.

The country's economy shrank for the third straight quarter in March registering a 0.6-per cent contraction compared with the December quarter and down 0.9 per cent over the same quarter last year, primarily due to weaker consumer spending, significantly lower capital investment and decline in exports.

According to a Reuter's poll earlier this month, the economy is expected to expand 0.8 per cent in the second quarter and register a 1.1-per cent growth for the whole year. Although the figure is below the government's forecast of 1.3 per cent, it is likely to be well above eurozone's other peripheral nations.

Last year, the Irish economy expanded just 0.2 per cent based on the statistics office's revised figure which was well below the 0.9-per cent growth reported earlier. In 2011, the growth was 1.4 per cent.

The government has brought down its budget deficit to about 8.5 per cent of the GDP last year from a whopping 32 per cent in 2010 and further aims to bring it down to below 3 per cent by 2015.

In its annual report released yesterday, the National Treasury Management Agency's chief executive John Corrigan said, ''Increased international investor confidence in Ireland has been reflected in the steep falls in Irish government bond yields from their peak in the middle of 2011.''

The yields for the 10-year bond fell from over 14 per cent in July 2011 to 3.84 per cent currently.

Ireland's National Asset Management Agency (NAMA), the bad bank with toxic assets, has generated a €228 million profit in 2012, Corrigan said.

Earlier this month, global credit rating agency Standard & Poor's has revised the country's outlook to positive and affirmed its long-term rating at 'BBB+' on improved prospects of debt reduction.