Ireland is making good progress in its attempts to wean itself off its international bailout and start paying its own way, according to the country's debt inspectors.
In a joint statement Thursday, the so-called "troika" of organizations charged with checking whether Ireland is sticking to the terms of its (EURO)67.5 billion ($82 billion) bailout - the European Union, European Central Bank and International Monetary Fund - said the country was running ahead of its goal to slash its deficits. Their statement said the Irish government's commitment to reduced spending and higher taxes "remains strong in a challenging environment."
Finance Minister Michael Noonan said Ireland appeared on course to escape dependence next year from its European and IMF lenders, who in 2010 granted Ireland emergency funds after its ability to finance itself was overwhelmed by the worst toxic bank debts in Europe.
Noonan told a Dublin press conference that Ireland was hopeful of securing a deal with EU chiefs by October that would remove tens of billions' worth of banking losses from of Ireland's national debt.
He said the goal, agreed as part of last month's EU summit, meant Ireland might avoid seeing its debt ratio peak near 120 percent of its economic output in 2014 - and might even fall back below the economically significant level of 100 percent. In 2011, the country's gross domestic product grew to (EURO)158 billion ($193 billion), its national debt to (EURO)169.3 billion ($206 billion).
Carrying a debt load above 100 percent of GDP, he said, was "like driving with the handbrake on. The cost of servicing that debt means we won't get the economy growing to its full potential."
In its report, the troika said Ireland was on course to slash its deficit to back below 3 percent of its economic output by 2015.
Ireland's government is hoping that a grand refinancing deal involving the future European Stability Mechanism might allow much of Ireland's bank-bailout debts, totaling (EURO)64 billion ($78 billion), to be transformed into mutualized European debts that Ireland would repay under longer, less onerous terms.
The troika's report was announced after Ireland confirmed that its economic output slumped in the first quarter of 2012, but improved growth figures from last year helped the country to escape a technical recession.
When asked what Ireland's minimum demands would be in looming negotiations with EU partners, Noonan raised an incredulous brow and said the questioner clearly would be no good at selling a calf at an Irish livestock market.
"Sure, if I said that, my friends in Europe would offer me the minimum," he said to laughter.
Noonan added that Ireland would be "ambitious" in seeking the maximum debt repackaging possible "but where it ends up I can't predict."
Current EU accounting rules have required Ireland to factor its long-term bank-bailout costs into the past two years' budgets, even though the repayments stretch out for decades. That decision forced Ireland to post EU-leading deficits of 32 percent of gross domestic product in 2010 and 11.1 percent in 2010.
Thursday's revised GDP figures for Ireland offered some relief on that front. The Central Statistics Office said Irish GDP actually grew 1.4 percent last year, double its initial estimate. Much of the change reflected a sharp revision upward in fourth-quarter GDP, which initially was measured as falling 0.2 percent. It actually grew 0.7 percent, the report said.
This change meant, excluding the exceptional bank costs, Ireland's deficit in 2011 now stands at 9.3 percent of the higher GDP figure. That easily beat the EU-IMF bailout target of 10.6 percent. Noonan said Ireland appeared likely to beat this year's deficit target of 8.6 percent.
The revised fourth-quarter figure kept Ireland from technically falling into a recession, which is defined as two straight quarters of economic decline. Irish GDP did fall 1.1 percent in the third quarter of 2011 but grew in the first half of the year.
The troika said Ireland's continuing adherence to austerity goals meant a further (EURO)2.6 billion in loans would be provided to Ireland. Noonan said Ireland had used 78 percent of the emergency loans already and the country's treasury intends to start issuing longer-term bills and bonds as foreign creditors' confidence in Ireland grows, enabling borrowing costs to come down.
In recent days Irish bond yields have fallen below those of Spain, which is currently negotiating terms of its own EU-led bailout of its banks.
Ireland's GDP, http://bit.ly/NnHNpq