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IMF warns voter 'fatigue' puts our recovery at risk

THE IMF has warned that Ireland could suffer from "fatigue" in its efforts to cut public spending -- while it anticipated modest growth and high unemployment.

The Washington-based authority outlined a series of measures for Brian Cowen's Government to consider in relation to Irish banks.

And it said that although the country had been Europe's poster boy in terms of its fiscal reform plans, the IMF said in its annual review of Ireland that there was too much resistance from voters and there was a risk "consolidation fatigue" could set in.

"Staying on target is critical to retain the hard-earned credibility," the IMF said.

The IMF said Irish GDP was projected to fall by around 0.5pc this year compared with 2009 and growth rates should gradually rise to about 3.5pc by 2015.

And it said that banks could be hit with an annual levy, similar to those introduced internationally, while the Government should come up with a scheme to allow banks to be wound up in an orderly fashion.

The IMF said further consolidation measures of at least 4.5 percent of GDP would be needed to reduce the deficit to 3pc of GDP by 2014, as planned.

"If GDP growth outcomes are weaker than those foreseen by the authorities -- a clear possibility within the current range of scenarios -- the additional effort needed may even be greater," the IMF said.

Unlike some other European Union states, Ireland has so far managed without any direct assistance from the IMF.

IMF staff, who compiled the statement in the second half of May, will publish their full report on Ireland in July.

The authority also called for support measures to protect vulnerable homeowners in Ireland burdened with mortgage arrears.

The IMF suggests that the banks, which have absorbed billions in State funds, could use their stronger financial position to fund a scheme to assist householders in the current economic crisis.

"With their bolstered capital, banks could absorb the initial costs, perhaps basing themselves on the welfare system to identify eligible beneficiaries," the IMF said. "This process will be aided by an overdue shift to a more efficient and balanced personal insolvency regime."

And it supported the idea of a move toward a medium-term budget framework.


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