Monday 22 January 2018

EC to hand over €3bn in aid as Ireland is deemed 'on track'

But warnings for Greece to try harder as IMF slates efforts to bring about recovery

Donal O'Donovan and Sarah Collins

IRELAND is on track with its bailout programme but Greece is at risk of sliding back into its old ways, officials from the bailout funds said last night.

Ireland is set to receive a further €3bn in aid from the European Commission after being judged "on track" to meet its 2011 deficit target.

However, the Government is being urged to make even steeper spending cuts this year to dispel doubts about its ability to manage its massive debt burden.

Under the terms of the bailout, the Government must reduce the budget shortfall to 10.6pc of annual output -- just more than €16bn -- by the end of the year.

"Fiscal adjustment is proceeding as planned, with the agreed measures enacted in a timely manner, and the fiscal targets so far either met or on track to be met," the Commission said in a report published yesterday.

But the report also found that while "important progress" had been made in cleaning up the banking sector, there were still market jitters over government borrowing, which is set to outstrip annual output this year and continue rising in the coming years.

"Given the sharp increase in public debt and the lingering market concerns about its dynamics, it is essential that Ireland meets -- and, if possible, exceeds -- the agreed fiscal consolidation objectives," the report said.


The €3bn in aid will bring to almost €22bn the amount handed over to Ireland by its international partners since the bailout was agreed last November.

A further €16bn is due between now and the end of the year.

German finance minister Wolfgang Schauble, in Brussels yesterday for a conference, said that it was now up to the eurozone's bailed-out countries to enact the necessary reforms to get themselves back on track.

"Though we have bought time for Greece, Ireland and Portugal, [it is] for these countries to take the necessary steps to lower their deficits and strengthen their economies," he said.

He added that it was not up to richer EU countries to bail out their poorer neighbours, reserving particular ire for Greece, which is the subject of a "debt sustainability" review by the Commission, European Central Bank and International Monetary Fund (IMF).

The positive report card for Ireland was in contrast to the "could try harder" the IMF scored Greece for its efforts to restore financial stability.

As Ireland was hitting its targets, the IMF told Greece to redouble efforts to get its national budgets back on track.

IMF officials said Greece was at risks of seeing its recovery programme fail if it did not carry on with the programme agreed with lenders.

The IMF was warning against the so-called "austerity fatigue" that makes it hard for countries to sustain long-term measures to reduce debt, particularly when the measures are seen to hurt growth.

"The view that seems to be taking hold is that the government programme is not working," IMF's chief of mission to Greece, Poul Thomsen, told a conference in Athens, Greece.

"The programme will not remain on track without a determined reinvigoration of structural reforms in the coming months.

"Unless we see this invigoration, I think the programme will run off track," Mr Thomsen added.

However, Mr Schauble said the crisis in Greece had revealed "structural weakness" of the EU fiscal and monetary policy framework, which "can't and should not routinely be fixed" by throwing other countries' money at the problems.

"You cannot close the gap between expenditure and income by asking others for more money," he added.

EU economics chief Olli Rehn told the same conference that the bailouts were "necessary to prevent further seismic shocks into the European financial system".

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