Our recovery will be quick says IMF boss

Kevin Doyle, POLITICAL REPORTER

IRELAND will be rapidly back on track it has been predicted by the head of the IMF.

In a rare piece of international praise, Dominique Strauss-Kahn said that he believes the Irish economy will be on firm ground again soon.

But he warned that the banking sector must be fixed first.

As ECB prepares to issues the first instalment of our €85bn bailout, the IMF's managing director said he was confident the money would be enough to pull the country back from the brink.

"I think the decision that has been made will fix the problems in the banking sector, and the Irish economy will come back on track rather rapidly," he said.

Mr Strauss-Kahn was speaking in India as new Exchequer figures showed that the Government's tax-take is nearly €600m ahead of target.

In a fresh boost, Finance Minister Brian Lenihan announced that better-than-expected returns on corporation tax was bolstering the country's coffers.

But income tax is a massive €356m lower than anticipated as a result of the unemployment rates.

Borrowing costs fell yesterday in both Dublin and Lisbon as the European Central Bank launched an aggressive intervention in government bond markets.

bullied

Traders say that the ECB was buying Irish and Portuguese bonds in €100m tranches -- four times bigger than previously.

This saw the yield on 10-year Irish bonds drop to 8.5pc from a recent high of over 9.5pc and the euro rallied.

However, president of the ECB Jean-Claude Trichet failed to outline the ECB's strategy at a press conference in Frankfurt.

It had been expected that he would indicate a new effort to steady to the markets but he simply stressed that the responsibility of eurozone governments to win back confidence in their public finances.

But he also insisted that Ireland was not bullied into seeking a bailout, as claimed by Justice Minister Dermot Ahern.

Mr Trichet said the rescue deal was the "best programme" to restore Ireland's prosperity.

"It goes without saying that it was the decision of the Government of Ireland," he said, adding: "I am confident that the Irish people ... will prove what they have always proved in the past -- namely that they are able to cope with difficult periods."

But it was revealed last night that if Ireland's situation worsens the money provided by the IMF will have to be the first to get repaid. The international organisation has "preferred creditor" status and expects to get its €22.5bn loan back before the EU, Britain, Sweden or Denmark get theirs from us.

kdoyle@herald.ie