Ireland has successfully concluded the final quarterly programme review mission for 2011 with the EU Commission, the ECB and the IMF. In each quarter Ireland has consistently achieved all of the targets set under our programme of assistance.
The review mission that has been ongoing since 10th January has assessed fiscal developments, the macroeconomic outlook, progress on commitments in the restructuring of the financial sector and in structural reform. The review also allows for discussions between Government and the external partners on changes to the Programme of Assistance, which will improve its effectiveness by supporting the economy’s potential to grow and create jobs.
On welcoming the successful conclusion of the review, Minister Noonan stated:
"I and my Government colleagues are pleased that the staff mission has assessed the programme to be on track and that all measures in the programme have been fully implemented. This successful outcome illustrates the ability of the Irish State to implement a challenging programme effectively.
The fiscal consolidation targets were achieved by a significant margin – the General Government deficit is expected to be under 10% as compared to a target of 10.6%. This consolidation was achieved in tandem with returning the economy to growth after three years of contraction.
In addition, to the achievement of the public finance targets, all of the targets in the financial sector were also met. The most significant of these was the achievement of the deleveraging targets with total deleveraging across Government supported banks of €40.5 billion to end-November as compared to a 2011 target of €34.7 billion. The two pillar banks sold €15 billion of assets at significantly better prices than anticipated in the PCAR/PLAR 2011 exercise. In addition, quarter 4 saw positive deposit flows for Irish banks in a very difficult eurozone environment.
The Government is fully committed to putting our economy and public finances on a sustainable basis. Assisting the private sector to create jobs is our primary goal. We are broadening our tax base so as to ensure that we have the available funds to pay for the high quality public services that our citizens require. The Government wants to make sure that that the provision of quality public services is not subject to the every whim of the international money markets.
The Government is fully aware that there is much to do in relation to our primary goal – to get Ireland back working. I and my colleagues are speedily implementing the budget measures that are targeted at key growth sectors within our economy. In addition, the Government will be shortly setting out additional measures under the Pathways to Work initiative and the Action Plan for Jobs"
Minister Howlin on the conclusion of the visit stated;
"I welcome the endorsement by the troika that Ireland has met all targets to date and the programme remains on track. The Government is committed to meeting our targets under the programme as continuing to do so is the best way of ensuring that the programme succeeds and for us to return to the market. A substantial number of actions under the programme, some 90, have been successfully completed to date. These measures have been designed to enhance the sustainability and competitiveness of the Irish economy.
We have made substantial progress since taking office; expenditure was significantly reduced in 2011 and this downward trend will continue in 2012 as Departments focus on priorities, increase efficiencies and reduce waste. Furthermore we have reformed the budgetary process including the new Medium Term Expenditure Framework and work which will further assist in better budgetary planning and management of resources for the coming years.
We have considerably reduced the paybill and significant further reductions are planned for 2012 as public service numbers are reduced and as we reduce additional costs. These actions along with the implementation of our ambitious public service reform plan will yield significant benefits in terms of savings for the State and provide more cost effective, integrated, customer-focused public services."
Both Ministers concluded:
"We welcome the fact that our programme remains on track and we continue to meet all our targets. Since the last review the 2011 exchequer returns confirmed that we comfortably met the deficit targets in the programme and we have introduced a budget which continues this sustainable path for our deficit. This is an essential step towards regaining economic stability, ensuring the sustainability of the public finances and providing the platform to deliver sustainable growth and jobs.
Notes to Editor
There were a number of changes agreed to the Memorandum of Understanding, which include:
The fiscal responsibility bill is to be published by quarter 2 2012.
The publication of the Personal Insolvency legislation was deferred to end-April
The future direction for ILP will be made by end-April
Amendments will be introduced to strengthen the EROs/REAs legislation, to strengthen the inability to pay clause
PCAR 2012 – the results will be published in co-ordination with EBA no later than end-November 2012
Recent Economic Developments and Outlook
The economic recovery has slowed after solid growth in the first half of 2011
Deteriorating external conditions pose risks in 2012, and to ensure the achievement of programme objectives we will continue to refine the program and maintain our record of strong policy implementation
Fiscal Policies
The substantial fiscal consolidation targeted for 2011 has been achieved by a significant margin.
We will implement Budget 2012 in the same prudent manner, while cushioning the impact on growth.
The general government deficit is firmly set on a declining path to below 3 percent of GDP by 2015.
Achievement of the ongoing fiscal consolidation will be underpinned by a coherent set of budgetary reforms:
· Institutionalization of the CRE process
· Performance-Based Budgeting
· Reform of Allowances, Overtime, and Sick Leave
· Public Service Reform
Furthermore, we are developing important institutional fiscal reforms consistent with the European framework.
Financial Sector Policies
We will continue to press forward with reforms to restore the health of the Irish financial system and address the challenges remaining
Major progress in downsizing our banking system was made in 2011, and we are working to refine the deleveraging framework to minimize risks to lending to the economy and discourage excessive competition for deposits.
For PCAR 2012, we plan to maintain the distinctive rigor and standards of PCAR 2011, especially the independent loan loss forecasts, while aiming to align its timing with the EBA’s EU-wide stress test.
The 2011 financial statements of the banks covered by the ELG will be prepared on the basis of new more conservative and realistic provisioning and disclosure guidelines
We will complete by end-June 2012 the recapitalisation of ILP. We are finalizing the determination of the way forward for ILP.
We are implementing our strategy to restore the viability and solvency of the credit union sector.
We are finalizing relationship frameworks with the covered banks to ensure their core businesses will be run on a commercial, cost effective and independent basis designed to ensure the value of the banks as an asset to the State.
We have made significant progress toward strengthening banks’ boards
We continue to enhance banking supervision and supervisory capacity.
We are promoting efforts by lenders to address loan arrears and unsustainable debt, thereby reducing uncertainty regarding bank assets and facilitating a recovery in domestic demand
Reforms to the personal insolvency framework will underpin the resolution of unsustainable debt while safeguarding Ireland’s traditional debt service discipline.
Steps are also being taken to help SMEs, including those facing financial difficulties.
An effective credit register is an essential building block for sound lending decisions and is a valuable supervisory tool.
Structural Reforms
An ambitious programme of structural reforms to support job creation, increase Ireland's competitiveness and boost potential growth is being put in place.
We will take steps to strengthen activation and training policies to help jobseekers get back to work under the new Pathways to Work.
Reforms in the water sector is underway, together with a strengthening of competition policy enforcement.
Programme Financing
The programme remains well financed, and we are continuing preparations to regain market access as envisaged.