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21st May 2022

Ireland becomes first euro country to quit bailout programme

  • Dublin: Ireland will leave its three year bailout programme in December (Photo: William Murphy)

Ireland will become the first eurozone country to exit a bailout programme, after deciding that it will not request a temporary credit line when its €85 billion rescue finishes on December 15th.

The move will bring to an end a three year programme that has seen the country put in place over 250 separate austerity measures.

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EU officials had kept open the possibility of establishing a temporary credit line as the country eased itself back onto the debt markets.

However, with interest rates on 10 year Irish government bonds now standing at 3.5 percent, down from a peak of 15 percent in 2010, Enda Kenny's government is convinced it can take care of its own needs on the money markets without further help.

Speaking as he entered the Eurogroup meeting, Irish finance minister, Michael Noonan, said that making a clean break from the programme was "in the best interests of the country" and could be made "with a low level of risk".

Leaving the programme would "restore economic and financial freedom to Ireland," he said, adding that the period of relative economic calm across the eurozone and financial markets offered "a benign window of opportunity."

Noonan indicated that Ireland would face debt repayments worth around €6 billion in 2014. The government also says that it has €20 billion in cash reserves which will ensure that it can meet debt repayments and funding costs until early 2015.

For his part, Dutch finance minister Jeroen Dijsselbloem, who chairs the Eurogroup, told reporters that he had "full confidence in the ability of the Irish government to maintain the reform momentum".

Ireland was pushed to the edge of bankruptcy in 2010 after the collapse of Anglo-Irish bank and the Bank of Ireland caused its budget deficit that year to reach 35 percent, more than ten times higher than the EU's 3 percent limit.

After a deep recession in 2010, Ireland is now among the better economic performers in the eurozone. The Commission's Autumn Forecast, released last week, expects Ireland's economy to continue its recovery in 2014 and 2015 with GDP growth of 1.7 percent and 2.2 percent respectively. The country's unemployment rate has also started to fall is expected to hit 12.3 percent next year.

However, an end to visits from the Troika does not mean an end to austerity in Dublin.

"The economy is growing again… but it's not over," said Noonan."The kind of policies we are pursuing will continue to be pursued".

The country's debt pile will peak at 124 percent, lower only than Portugal, Italy and Greece in the EU, before falling to 121 percent and 119 percent over the next two years. However, this will still leave it almost double the 60 percent limit spelt out in the eurozone's stability and growth pact.

Meanwhile, Spain also confirmed plans to exit its two year finance sector support programme in January 2014.

Analysis

Lessons from Ireland's failed bank guarantee

Five years after the failed Irish experiment of giving a blanket state guarantee for banks, the EU has more rules in place, but taxpayers' money is still on the line.

Ireland and Portugal set for debt deferral

Ireland and Portugal are to be given more time to repay their emergency loans with both countries seen as good pupils in following the imposed austerity programme.

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