Economic Adjustment Programme for Ireland—Summer 2011 Review

This paper reports on the joint EC-ECB-IMF review of policy conditionality under EU/IMF financial assistance programme to Ireland up to end-July 2011. It also incorporates in an annex the updated programme documents, endorsed by the ECOFIN and the IMF Executive Board on 2 September 2011.

Ireland is expected to return to positive albeit modest economic growth in 2011, thanks to strong exports (aided by progress in recovering the lost cost competitiveness), while domestic demand remains subdued, as much needed balance sheet repair continues. Softening global growth constitutes a downside risk. Programme implementation remains strong: fiscal targets have been met or are on track to be met and important reforms are being advanced in the banking sector (e.g., domestic bank recapitalization) and other areas (e.g., establishment of a fiscal advisory council, and legislated gradual increase of the state pension age from 65 to 68 by 2028). The programme remains well-financed, and—thanks to the lower than expected fiscal cost of bank recapitalization—the programme envelope is now seen to cover financing needs until the second half of 2013, though the Irish authorities intend to re-enter the market sooner, also to keep a sufficiently large cash buffer for the post-programme period.

Going forward, continued strict programme implementation remains essential to buttress credibility in the policy framework and in the achievability of the programme consolidation objectives.