Ireland’s Minister for Finance Michael Noonan said the exit from its bailout rescue was a “milestone”, but not the end of the road. He told a press conference that Ireland’s deficit and debt was still far too high.
“We 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 programme, implementing austerity to bring down its budget deficit and rebalance the economy,” he said.
Exiting the bailout marks a reduction in the influence of the troika over policy-making and the direction of the Irish economy, but Noonan noted this would not mean a relaxation of the tough policies that have been imposed on Ireland’s population. He believes, though, the Irish economy is slowly improving.
“People are beginning to spend. Property prices are improving. It's fragile. But in my view things are building well and I would hope that next year would be better for a lot of people who have made a lot of sacrifices.”
Ireland was forced to accept the bailout programme in 2010 when borrowing on the financial markets became too expensive for it to support itself. However the country’s borrowing rates on capital markets are now significantly lower than the unsustainable levels of that time.
Neil Veitch, manager of the SVM World Equity fund, said the move is positive in that it demonstrates Ireland has made progress towards the troika’s objectives in terms of fiscal targets. “It’s not quite there yet but the bond market is confident. Leaving the programme probably aids social cohesion, and they’ve managed to achieve this with minimal upheaval.”
One negative is that Ireland could have done more. “You should never waste a good recession,” said Veitch. “Ireland has maybe not learned the lessons of the past. It could have tackled, for example the low level of generics penetration in the pharmaceuticals sector and infrastructure issues. It’s not addressed many of the structural issues. Many sectors are still pretty unreconstructed.”
In terms of investment opportunities in Ireland, Veitch sees fewer today than he did 12 months ago. “A lot of Irish export stocks have run quite hard already. The easy money has been made, but there may be scope for upside from here. The Irish banks may be of interest to us. Bank of Ireland and AI will effectively have an oligopoly, which is good news for the banks’ shareholders.”
