Ireland is on track to exit its bailout later this year after passing its penultimate review by lenders, even with the economy in recession and uncertainty about the country’s banking sector persisting.
Completing the 85 billion euro (HK$863.9 billion) aid deal it was forced into after its biggest banks collapsed in 2010 would represent a much-needed success story for the euro zone and the austerity it has prescribed for crisis-hit states.
In 11 reviews by its European Union and International Monetary Fund rescuers, Ireland has consistently hit targets. It will be the first of the four countries bailed out to date by their euro zone peers to wean itself off emergency aid if it exits the scheme on schedule in December this year.
The EU is desperate for a smooth completion to show its tough-love approach can succeed, given the struggles of fellow aid recipients Greece and Portugal and deep public dissatisfaction with spending cuts and tax hikes across the bloc.
“It is remarkable that a fiscal framework is still intact,” an EU official told Reuters, noting the significant deterioration in the euro zone economy since the Irish programme was agreed.
Ireland sought help after a property crash left its banks massively under-capitalised and blew a hole in the nation’s finances. It has agreed to a detailed review of its troubled banks’ loan books this year, before Europe-wide stress tests next year, to reassure international lenders that the banks which plunged Ireland into crisis are finally fixed.
Craig Beaumont, the IMF’s mission chief for Ireland, said that while the review would not reveal how much capital the banks need, it would show whether they had faced up to the extent of bad loans on their books.