Irish banks must rein in unsustainable mortgage and SME loan arrears and tackle unemployment in 2013, according to teams from the European Commission, the European Central Bank and IMF.

However, the troika said the next tranche of funding would be released as Ireland had met its fiscal targets last year and remained on track to achieving a 7.5 per cent GDP deficit ceiling by 2015.

The comments come as the teams completed their ninth quarterly review of Ireland’s economic programme during a visit to Dublin from January 29th to February 7th.

More than one in 10 homeowners were in arrears of 90 days or more, according to the Central Bank, in the three months to end of September 2012.

IMF Ireland mission representatives said: “Given the scale of mortgage arrears, supervisors should ensure that banks intensify their engagement with customers in order to find durable solutions appropriate to borrowers’ circumstances.”

Changes to insolvency law are expected to help decrease arrears. “Timely activation of the new personal insolvency framework will support these efforts. As a complementary step, greater efforts can be made to pursue legal remedies for unsustainable investment-property related debts.”

Unemployment remained stubbornly high and the troika said “reducing it must remain an urgent policy priority”, though “significant skills mismatches among the unemployed” may hold up any short-term change in the rate.

The troika commended Ireland’s progress in 2012, which has contributed to improved market access and lower sovereign bond yields.

Ireland’s recovery is expected to gain momentum with forecast growth of more than 1 per cent this year and more than 2 per cent next year.

A press conference with IMF Ireland mission chief Craig Beaumont to discuss the report was cancelled yesterday.