independent

Saturday 19 April 2014

Ireland still faces challenges as unemployment too high: IMF chief

More reforms in public spending are needed, says Christine Lagarde

International Monetary Fund (IMF) Managing Director Christine Lagarde
International Monetary Fund (IMF) Managing Director Christine Lagarde

Ireland is in a much stronger position but still faces “significant economic challenges” , IMF’s Christine Lagarde has warned as Ireland exits the bailout.

Ms Lagarde, Managing Director and Chair of the International Monetary Fun said today that Ireland’s unemployment is “too high” and “concerted policy implementation” is necessary for Ireland to recover fully from the crisis.

The IMF issued a measured statement this evening in relation to Ireland’s bailout exit.

Ms Lagarde’s statement firstly praised the Irish government but issued stern warnings that a lot more work needs to be done, for Ireland to recover.

She said: “Steadfast policy implementation by the Irish authorities has underpinned the achievement of core program objectives: stabilizing the financial sector, significantly improving the fiscal position, and regaining market access.”

“Renewed job creation and a range of positive indicators signal an emerging recovery. As a result, Ireland is now in a much stronger position than when its program began.”

However, the IMF’s managing director said public debt sustainability “remains fragile”.

“Yet Ireland still faces significant economic challenges. Unemployment is too high, public debt sustainability remains fragile, and heavy private sector debts and banks’ slow progress in resolving nonperforming loans weigh on domestic demand.”

“Continued concerted policy implementation is therefore necessary for Ireland to recover fully from the crisis.”

Her straight-talking statement comes on the day that Finance Minister Michael Noonan described the exit as a “significant milestone”.

Ms Lagarde recommended a further “broadening” of the tax base, and reforms in public spending.

She said: “Steady fiscal consolidation has been a hallmark of Ireland’s program with deficit targets again expected to be met in 2013.”

“Budget 2014 sets out a balanced pace of adjustment in coming years, as needed to put public debt on a declining trajectory. To limit the drag on growth, revenue increases should focus on further broadening the tax base, and reforms of health, education, and social protection spending should be undertaken while protecting core public services and the most vulnerable.”

Ireland’s exit from the bailout is officially due to take place on Sunday.

Mr Noonan himself said the tough fiscal policies must be continued as the country's debt remains high.

Ms Lagarde’s statement added: “To help revive lending and sustain a recovery in demand, efforts to resolve mortgages in arrears should be intensified.”

“Reducing unemployment is a central priority, requiring improved employment services and training for jobseekers, together with steps to promote credit to SMEs, where the support of European partners is welcome.

Ms Lagarde added that Ireland’s track record within its EU-IMF supported program “bodes well” for its success in tackling these remaining challenges.

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