Ireland is First Eurozone Country to Emerge from Bailout
Ireland’s government has announced that the country is ready to officially exit its international financial rescue programme; just over three years after the International Monetary Fund (IMF) and European Union (EU) offered a €67.5bn rescue package as it neared bankruptcy.
“This isn’t the end of the road. This is a very significant milestone on the road,” said Michael Noonan, Ireland’s finance minister, at a news conference. “But we must continue with the same types of policies.”
Ireland will now gradually fund itself from the markets. “We are confident we are making a clean exit,” added Noonan. “We are not junk, we are doing well.”
The IMF and EU’s price for the bailout in November 2010 was a programme of 270 separate cuts to budgets in unemployment benefits, health, education and other spending areas. Salaries were slashed by as much as 20% while the government also raised taxes in order to reduce its budget deficit and rebalance the economy. The austerity package has, however, enabled Ireland to become the first eurozone member provided with a bailout to emerge from recession without precautionary funding as a backup.
At the time of the bailout three years ago, the daily
Irish Times
commented: “Having obtained our political independence from Britain to be masters of our own affairs, we have surrendered our sovereignty to the European Commission [EC], the European Central Bank [ECB] and the IMF.”
Noonan pledged that Ireland will maintain fiscal discipline and added he would consider cutting income tax in the next two budgets to help boost economic growth. “We can’t go mad again, even if we had the resources,” he added.
The minister also praised the fortitude and forbearance of the public, who supported the government as it implemented €28bn in tax increases and spending cuts without the widespread social unrest and civil disturbances triggered in other bailout countries such as Greece. The country’s unemployment rate, although still 12.5%, is now falling but the improvement owes much to a resumption in emigration – more than 75,000 people left the country last year and 200,000 have moved abroad since the financial crisis first broke five years ago.
Remaining Work
“The decision Ireland has taken to exit the programme without any further precautionary credit line is possible because of what we have achieved,” wrote Ireland’s deputy prime minister, Eamon Gilmore, in UK daily
The Guardian
. “Competitiveness has been restored as our costs and prices have risen more slowly than those of our trading partners.
“We have made a budgetary adjustment equivalent to 18% of our gross domestic product [GDP] and introduced significant structural reforms. We have regained the confidence of international investors with funds immediately available to us equivalent to our entire funding needs in 2014. From next year, we will have a primary budget surplus which means we are raising more in revenue than we spend on everything excluding debt interest.”
Gilmore added that there was now work to be done at a European level. “We must complete the project of banking union, involving not just common supervision, but a common resolution framework with an appropriate fiscal backstop and effective deposit insurance arrangements,” he wrote.
“If a bank anywhere in Europe can pose a threat to the financial system of all its members, the necessary framework must be in place to respond to that risk.”
Christine Lagarde, the IMF’s managing director, commented that Ireland’s return to financial health was a hopeful sign for the future. “The Irish authorities have established a very strong record of policy implementation. This bodes well as Ireland exits its EU-IMF-supported programme,” she said.