Euro Zone Crisis
The euro zone crisis was triggered in 2009 when Greece's debts, left by its previous government, reached a record 300 billion euros, leaving the southern European economy with debt levels more than four times higher as a proportion of gross domestic product than the official euro zone cap of 60 per cent of GDP. Since the original problems were uncovered, Greece has been bailed out twice, and lenders have also had to rescue Ireland and Portugal. In the latter half of 2012. Cyprus also required a bailout.
Ireland gets US$1.17b from IMF after review
Agence France-Presse in Washington
The International Monetary Fund disbursed a fresh US$1.17 billion (890 million euros) to Ireland, approving the country’s progress under its two-year-old rescue program.
The IMF said that Ireland had pushed ahead with policy reforms and deficit cutting despite a slowdown in growth this year.
it said it expected the country’s fiscal deficit to fall under the 8.6 per cent of GDP target despite pressure to raise social welfare spending due to high joblessness.
The government’s recently submitted 2013 budget aims to reduce that further to 7.5 per cent.
“The program with Ireland has now been in place for two years and the Irish authorities have consistently maintained strong policy implementation,” said IMF First Deputy Managing Director David Lipton.
“All program targets have been met and a range of fiscal, financial, and structural reforms are in train,” he said.
“The authorities have demonstrated their commitment to put Ireland’s fiscal position on a sound footing, with the 2012 deficit target expected to be met even through growth has been low.”
The IMF said that it expected the Irish economy to grow by 1.1 per cent in 2013 and 2.2 per cent in 2014.
Public debt will peak next year at 122 per cent of GDP, the IMF said.
But it warned that this forecast faces “significant risks” if the economies of Ireland’s main trading partners further weaken -- if the eurozone and US economies slow further.
In addition, “the gradual revival of domestic demand could be impeded by high private debts, drag from fiscal consolidation, and banks still limited ability to lend.”
If growth remains very low in the next few years, the state debt burden could continue to grow, especially if the government is forced to further aid weak banks.
The Fund stressed the need for “vigorous implementation” of financial sector reforms to strengthen the banks, as well as reforms in the personal bankruptcy process.
The Fund launched its three-year, $30 billion loan program for Ireland on December 16, 2010, as part of the bailout plan together with the European Commission and the European Central Bank.
The Fund urged its European partners to follow through on promises to further aid Ireland and its banks.
“Ireland’s market access would also be greatly enhanced by forceful delivery of European pledges to improve program sustainability, especially by breaking the vicious circle between the Irish sovereign and the banks,” it said.
“By supporting medium term growth and debt reduction prospects, this would help avoid prolonged reliance on official financing.”