The European Commission has given Ireland a broad thumbs-up on meeting commitments under the EU/IMF €67.5bn loan agreement.
But the Commission has warned that despite a stabilisation in the jobs situation, long-term unemployment could lead to structural unemployment – a situation when there is a mismatch between those skilled workers seeking jobs and demand in the labour market.
“The share of long-term (more than one year) unemployed comprised 55pc in the first quarter of 2011, of which more than half seeking work for over two years,” according to the report.
“There is a clear risk that the increasing long unemployment spells develop into structural unemployment.
“Limiting this risk requires considerable attention going forward.”
It added that while unemployment fell slightly in both seasonally adjusted and unadjusted terms in the first quarter of 2011, standing at 14pc, this is below programme expectations.
On a more positive note, the Commission said there would be a return to positive economic growth this year, while the budget deficit was expected to be well below the 10.5pc of GDP target.
The report added that the recapitalisation of the banks had been completed and at a cost that is lower than had been originally anticipated.
The Commission also welcomed the Government's plan to publish a three-year plan outlining the measures it planned to take to reduce the deficit to 3pc of GDP by 2015.
It added that "early specification" of the plans would help sustain recent improvements in international sentiments towards Ireland – with the cost of borrowing on international markets continuing to fall.
It also highlighted that exports are strong despite fears of a slowdown in the European big economies.
It follows similar comments last July when the so-called “troika” of the IMF, the European Commission and the European Central Bank said that Ireland was “on track” and “well financed” in their third quarterly review of Ireland’s bailout.
Earlier this week, the IMF urged the Government to seek to raise €5bn by selling State assets in its quarterly assessment of the economy.
The Commission’s report was welcomed by Finance Minister Michael Noonan.
“The Irish programme is well on track,” he said today.
“Important progress has been made in the areas of fiscal consolidation, strengthening of the domestic financial sector and growth-enhancing structural reforms in line with the programme conditionality.”