High unemployment biggest challenge facing Ireland on bailout exit - IMF
HIGH unemployment will be the most important challenge facing the country as it leaves the bailout, the International Monetary Fund (IMF) has warned.
The Washington-based body also warned that the mortgage arrears problem was a “cloud of uncertainty” that was hanging over the banks and property market and threatened to hold back Ireland’s recovery.
As the troika wraps up its final review mission under the programme, IMF Ireland mission chief Craig Beaumont said three fifths of those out of work have been unemployed for more than a year.
“These people, some of them will find it quite difficult to regain work even as employment starts to recover,” he said.
Mr Beaumont said progress wasn’t as fast as hoped in tackling mortgage arrears.
He said efforts had been made to make the bankruptcy regime “more workable” and that a legal judgement prohibiting repossessions had been dealt with.
But he said there has been a “wait and see attitude” from households and banks.
“They (the banks) may be waiting and hoping that the situation would get much better and naturally cure problems so they wouldn’t need to do anything,” Mr Beaumont said.
“On both sides there seems to be no sufficient engagement to deal with the problem.
“There’s just this cloud of uncertainty that hangs over the banks’ balance sheets and hangs over the property market and together they hold back Ireland’s potential recovery.”
Mr Beaumont also said that the Government will need to continue fiscal consolidation in the next few years as public debts remains above 120pc of the value of the economy and the deficit – the shortfall between how much the state spends and takes in through taxes – remains high.
The senior IMF official said the Government has outlined that there is a need in 2014 and 2015 for measures to reduce the deficit.
“There would still be further reductions in the deficit in subsequent years, but they may not need active measures, or not so substantial active measures, just maintaining a close control of spending, relative to growth in the economy,” he said.
“And over time, progressively, lower the deficit.”
Mr Beaumont said it was up to the Government to decide whether an overdraft facility to ease the transition from bailout to full market access would be useful.
The senior IMF official said that Ireland is in a strong position in terms of its bond yields and has enough cash built up, but uncertainty remains in Europe and the global economy.