Troika praises Ireland for ‘steadfast’ adherence to programme

The International Monetary Fund (IMF), the European Commission (EC) and the European Central Bank (ECB) have commended Ireland's progress towards meeting its deficit targets following the eighth review of the country's funding programme. The IMF also praised Portugal's progress in the fifth review of the funding programme, but found the country would not meet its target this year.

A joint statement from the IMF, the EC and the ECB on Ireland said policy implementation "remains steadfast despite the challenging external environment". This helped the government to remain on course to meet spending targets for 2012 and lent support to a gradual recovery of growth to around 0.5% in 2012.

However, a number of vulnerabilities remained in the economy, the statement said, with weak exports and falling employment creating drag. "Unemployment remains unacceptably high, especially among the youth, making job creation and growth a key priority," the Troika said.

The IMF highlighted even more significant challenges for Portugal. "Fiscal adjustment is facing strong headwinds," the Fund's review said. "Despite spending discipline and output evolving broadly as envisaged in 2012, the fiscal deficit targets for this year and next are beyond reach due to a large (and persistent) shortfall in tax revenue collections."

Portugal's problems were being compounded by social pressures arising from continued austerity and persistent unemployment. "The announcement of further austerity measures to underpin the 2013 budget is testing the broad-based political and social consensus that has buttressed the program to date," the IMF said.

Nevertheless, "important strides" had been made in the programme, the IMF said. Macroeconomic imbalances have been reduced, and the financial sector kept stable. "Perhaps more important from a medium- to long-term perspective, a range of essential labour and product market reforms that should enhance competitiveness and productivity have been put in place," the IMF said.

In light of this progress, Abebe Aemro Selassie, the head of the IMF mission, said some leeway would be granted on Portuguese deficit targets for next year. "The agreement was that remaining adjustments should be rephased, hence the adjustment for the fiscal deficit targets from 3% to 4.5% for next year," he said. By contrast, Ireland's target deficit for 2013 was 7.5% of GDP.