Michael Noonan, finance minister of Ireland, said Irish exit from its bailout rescue is a milestone but not the end of the road.
Ireland has become the first euro zone nation to complete the lending deal put in place by a group of international lenders, known as the troika.
It was seen by many in Ireland as a day of humiliation, when the government went cap in hand to the European authorities and the International Monetary Fund. The country was rescued with an 85bn euro package.
Three years on, Ireland is escaping the shackles of the bailout and going back to financial markets rather than other governments for its borrowing requirements.
Economic recovery has played an important part in that. Investor confidence, demonstrated by sharply lower borrowing costs, looks secure at this stage.
But Ireland still has to deal with the historic debt burden. It needs growth to help bring down annual deficits, and with an export-focused economy that will depend on continued expansion, rather than reversals in its major trading partners.
Noonan said in a press conference marking the exit that Ireland’s deficit and debt was still far too high. He argued this isn’t the end of the road, this is a very significant milestone on the road, but they must continue with the same types of policies.
Ireland sought emergency help three years ago to keep its finances under control and has met the terms of the program, implementing austerity to bring down its budget deficit and rebalance the economy.
The troika, the European Union, International Monetary Fund, and European Central Bank, have held significant influence on policymaking and the direction of the Irish economy. Exiting the bailout marks a waning of that influence, but Noonan said this would not mean a relaxation of the tough policies that he acknowledged had hit the Irish population hard.
Noonan pointed out that the real heroes and heroines of this are the Irish people.
He also said the economy was getting better. In his opinion, people are beginning to spend, property prices are improving, it’s fragile, but in his view things are building well and he said he would hope that next year would be better for a lot of people who have made a lot of sacrifices.
Although Noonan pledged to maintain fiscal discipline, he said the government would consider income tax cuts in the next two budgets to give the economy some support. He said if they can make changes which help the economy to grow better and create extra jobs, those are the kind of things they’ll do.
Ireland was forced to accept a three-year 85bn-euro bailout program in 2010 to help pay its bills when borrowing on the financial markets became far too expensive. But Noonan said Ireland’s borrowing rates on the capital markets were now significantly below the unsustainable levels of three years ago.
Government fund-raising on the capital markets earlier this year means Ireland can leave the bailout with more than 22bn euros in cash. Noonan said that the country could cut its total debt from a peak of 124% of gross domestic product this year to 116 in 2014 using its cash buffer.
However, economists warned that the economic situation was still fragile. They argued the Irish government has to be prudent, because you can’t just cut taxes for the sake of it. However, analysts argued that it’s a good story for the European Union and it’s a good story for Ireland but they’re still at the mercy of global factors.
Nevertheless, the Irish economy is now emerging from one of the deepest recessions in the euro zone, and is forecast to grow by about 2% next year. Unemployment has fallen below 13%, from a 15.1% peak in 2012.
Analysts said that there are good reasons why Ireland is coming out of the bailout ahead of other countries. They stressed that crisis management by policymakers has been good, quite disciplined.
But in the other hand, they pointed out that unemployment is high, and more austerity cuts to come, Irish people may rightly question whether economic management in the last couple of years can be called a success.
Eamon Gilmore, deputy prime minister of Ireland, said there was still much more to do to get the economy back on track. He said three years ago Ireland was losing 7,000 jobs a month, but now they are creating 5,000 new jobs every month. But he said they have more to do, because they still have a high level of unemployment, particularly among young people.
The government’s actions over the last three years won praise from European Commission president Jose Manuel Barroso.
According to Barroso Ireland has basically recovered all the competitiveness it has lost in the previous decade. So, with this record and the commitment to reform that he has seen in Ireland, he said he is pretty convinced that the growth in Ireland will be sustained.
With Europe’s economy slowly returning to growth, and the euro zone emerging from recession this year, Portugal also hopes to complete its bailout next year.