High unemployment is the biggest challenge facing Ireland as it prepares to exit the EU-IMF troika bailout programme next month, according to the fund’s head of mission to this country.
"The most important challenge we see coming out of this programme is the high level of unemployment," said IMF official Craig Beaumont yesterday. "It remains high and three-fifths of the unemployed have been out of work for over a year. Some of them will find it quite difficult to regain work even as employment starts to recover."
Mr Beaumont noted that Ireland’s rate of unemployment has dropped from more than 15 per cent when the bailout commenced in late 2010 to 13.2 per cent and acknowledged that “better services and training” were now available to the jobless.
But he added that these need to be implemented “vigorously” and should involve “more resources”.
While stating that good progress had been made in repairing the economy, Mr Beaumont said the Government still has work to do to repair our public finances fully.
“Public debt is over 120 per cent of GDP and the deficit is still quite high. So the Government will need to continue its fiscal consolidation efforts in the next few years,” he warned.
Mr Beaumont said the IMF’s preference is that broadening the tax base would be preferable to raising income tax rates, along with a tight rein on public spending.
He added that our resources should be carefully targeted. “For example, in social protection, you can focus your efforts on the lowest income members of society rather than necessarily generally providing benefits to the whole population.”
This could be a reference to the Government’s decision in last month’s budget to offer free GP care to all aged five and under.
State raised €7.5bn
Mr Beaumont said a "key achievement" of the programme was Ireland regaining access to capital markets, highlighting how we had raised €7.5 billion this year, including the issuance of a 10-year bond at a rate of 4.15 per cent.
However, he said risks remain to Ireland’s access to markets and growth in terms of the euro area’s strength.
Mr Beaumont said “there’s still work to be done” to tackle mortgage arrears and non-performing loans in the financial sector although the banks were showing improved profits this year.
On mortgage arrears he said “each case needs its own appropriate lasting remedy . . . [while there was] also a need for borrowers to work with their banks”.
He welcomed the announcement this week of a pilot scheme between AIB and the Irish Mortgage Holders Organisation to help people in arrears with the bank to engage with it via the lobby group.
He said Ireland could be held up as a poster boy on how country bailouts should operate in the future.
“For us, it’s been an enormously positive experience because the authorities have shown such a strong commitment to addressing the underlying problems and strong leadership in developing the policies needed to tackle these challenges. Ireland’s progress will become an example that we will learn from in the future.”
