Troika bailout appraisal to be low-key

The troika 10-day appraisal of the bailout programme, starting today, is due to be a low-key affair, set against the background of the treaty referendum and rising fears for the eurozone with Spain in the cross-hairs of investors.

Representatives of the European Commission, the IMF and the ECB are agreed that the Irish programme is on track with the targets being broadly met in both the banking and government budget areas.

Changes including water charges, tightening social welfare payments and eligibility, reform of medical and legal professions, and the sale of state assets, as well as on-going talks on restructuring the Anglo Irish Bank promissory payments will be discussed.

Also on the agenda will be non-performing loans and mortgages and the household charge.

But behind the scenes, much analysis will focus on whether the country’s debt is sustainable in light of continuous and significant cuts to growth expectations on which much of the programme was based.

On the one hand, the turmoil seen in the markets in relation to Spain and also Italy over the past days has not appeared to affect Ireland, leading analysts to the view that Ireland has successfully decoupled itself from other eurozone countries under pressure.

Recent bond swaps proved there was an appetite for Irish government bonds, while at least two of the big three ratings agencies — S&P’s and Fitch — are optimistic about a return.

However, while the rates may not have moved, they are still too high if the country had to return to the markets now.

The Government has not been testing them recently, preferring to hold off until after the referendum at the end of next month.

Exports, the main plank on which the country’s recovery is based, have been disappointing and there are fears the on-going eurozone crisis, together with a tepid global economic recovery, will exacerbate the situation.

The domestic economy is showing little signs of recovery with savings rates growing and unemployment rates stuck at around 14%. The one bright spot is tax revenue which appears to be holding up.

The Government will be hoping it is not forced to make further cuts to spending but will need a lot of luck in meeting the targets, especially as spending on health continues to overshoot.

None of this can be separated from the Government’s efforts to cut the cost of the debt and while the ECB has not been publicly very encouraging in efforts to restructure the Anglo promissory notes, they continue to work with the technical group on a plan.

The updated figures will be factored into the commission’s forecast for each of the member states due out at the end of May or early June. The pressure is on in Spain, especially for the more or less autonomous regions to submit their figures quickly to Madrid and on to Brussels.

With the markets continuing to lose faith in one of the eurozone’s biggest economies, it is important to build confidence in the state’s ability to manage its debt and deficit.