Ireland set for bailout exit after final EU-IMF review

(DUBLIN) - Ireland will next month become the first eurozone country to exit a financial bailout programme after passing Thursday a final stringent review by the European Union and International Monetary Fund.

"This is a significant day, that many thought, and some feared, would never be reached," Finance Minister Michael Noonan and Expenditure Minister Brendan Howlin said in a joint statement.

Ireland was rescued with the help of 85-billion-euros ($115-billion) from the International Monetary Fund and European Union in November 2010.

The bailout exit, due on December 15, will result in Ireland fully returning to the international lending markets.

Dublin will also have an increased level of independence in economic decisions after accepting stringent oversight in exchange for the emergency funding.

"Real progress has been made in getting to a sound fiscal footing," the IMF Mission Chief to Ireland Craig Beaumont said.

"My message is that Ireland's programme will become an example that we learn from in the future," he added.

The European Commission, the IMF and the European Central Bank -- the so-called troika of lenders -- insisted on tax rises, structural reforms and the sale of state assets in exchange for the bailout after Ireland was overwhelmed by huge national debts caused by a banking crisis and property market collapse.

Last month, Irish Prime Minister Enda Kenny confirmed Ireland would exit its bailout, becoming the first of four bailed-out eurozone countries to do so.

Other eurozone countries to have been rescued are Greece which was the first, Portugal and Cyprus.

The head of the European Central Bank, Mario Draghi said "the Irish government has to be congratulated".

Ireland's economy crashed in 2008 after a decade of almost double-digit growth fuelled by cheap credit and a booming construction and property sector.

The EU has long-hailed Ireland, the one-time "Celtic tiger" as the "star pupil" of the bailed-out countries.

Ireland made a partial return to the markets last March, raising five-billion-euros in their first ten year government bond since before the bailout.

Falling unemployment figures and a modest return to growth, 0.4 percent in the second quarter, are used by the EU and Dublin as indicators that austerity is working.

After coming to power in a general election called in the months following the bailout, Kenny's coalition government continued to implement the stringent austerity measures required under the terms of the programme.

Unsurprisingly, the deficit has fallen considerably from pre-bailout levels with Dublin estimating its deficit will be 4.8 percent of gross domestic product (GDP) in 2014 and 2.9 percent in 2015.

Dublin pumped billions into its banking sector when house prices collapsed in what is one of the world's worst property crashes.

According to the latest Central Statistic Office figures, property prices remain 48 percent lower than their 2007 peak.

Dublin must now decide if a precautionary credit line, or insurance fund, is needed in case market conditions become unfavourable once it exits the bailout safety net.

However with yields on Irish bonds now around 3.5 percent, almost five times lower than their 2011 peak, Dublin may decide to go it alone because of the possible domestic political fallout that may result should it accept further tough conditions in return for the fund.

The IMF said it has pointed out the benefits of having a precautionary credit line in place, while maintaining that the decision rested with the Irish government.

"It's not uncommon for countries exiting fund arrangements to have a backstop in place for some time after the programme," Beaumont said.

"Ireland is in quite a strong position in terms of its bond yields and has a sizeable cash buffer but some uncertainties still remain in Europe and the global economy."

Beaumont added: "We maintain the position that it's up to the Irish authorities to decide whether they would find a backstop useful."