Brussels, 04/05/2015 (Agence Europe) - Ireland's international lenders want the Irish government to take advantage of the current period of strong economic recovery in the country to set an even more ambitious public debt reduction target for 2016.
“In the light of the very strong economic recovery, a more ambitious budgetary target for 2016 would accelerate the reduction of the high government debt to GDP ratio and help protect against future shocks,” explains the European Commission, European Central Bank and International Monetary Fund in a joint statement issued on Friday 1 May after their third post-bailout surveillance mission in Dublin.
In 2014, Ireland had the strongest growth in the eurozone at 4.8% of GDP thanks to rising exports and gradual recovery of domestic demand and growth is expected to exceed 3.5% of GDP in 2015. When it comes to consolidating public finances, Ireland's deficit fell from 5.7% in 2013 to 4.1% in 2014 and expected to end up below the 3% cut-off point in 2015. Public debt fell for the first time since 2006, from 123.2% in 2013 to 109.7% in 2014.
The country's lenders say that two of the big three Irish banks have returned to profit. The European Commission recently endorsed a restructuring plan for Irish bank Permanent TSB. Last week, the bank announced that it had successfully increased its capital and removed the capital gap identified in the ECB and European Banking Authority's bank health check. Non-performing loans, however, although less frequent, still make up 23.2% of all bank loans in Ireland and the share of non-performing loans in the commercial sector is still high. The lenders say: “Loan restructurings need to accelerate and their sustainability should be continuously monitored.”
When it comes to structural reforms, the international organisations say: “Further efforts are needed to reduce public expenditure on pharmaceuticals and to improve cost-effectiveness in the delivery of healthcare, especially for hospitals.”
The next follow-up mission will take place in the autumn. (Mathieu Bion)