REFILE-UPDATE 1-Ireland heads for end of bailout in final review

Thu Nov 7, 2013 4:29am EST

  * Lenders to give bailed-out country final green light      * Likely to go without precautionary line when aid ends      * Much needed austerity success for EU, limited parallels        By Sam Cage      DUBLIN, Nov 7 (Reuters) - Three years after going cap in  hand to international lenders for a bail out, Ireland is set to  step out on its own again.      The European Union and International Monetary Fund are due  to sign off later on Thursday on the last part of a 85 billion  euro ($114 billion) bailout, leaving Ireland to exit the process  by the end of the year, the first crisis-hit euro zone country  to do so.      Debts resulting from a rescue of its crashing bank sector in  2008 helped force Ireland into seeking aid from its EU partners  and the European Union two years later as the euro zone's debt  crisis deepened.      The official "troika" of lenders - the European Commission,  European Central Bank and IMF - are conducting their final  review of the bailout and given Ireland has met every major  target, are widely expected to release the final funds.      They are expected to release statements after about 1200  GMT.      The main issue remaining is whether the government will take  out an insurance policy of asking for a precautionary credit  line when the bail out ends. It has indicated in recent weeks it  may go it alone as it has funding into 2015.      "The assessment of the European Commission, the ECB and the  IMF is largely positive, though they remain wary of unresolved  problems in the banking sector," said Dermot O'Leary, economist  at Goodbody stockbrokers.      The process may also be complicated by German efforts to  form a new government given that Berlin is one of the main  contributors to aid programmes.      The country of 4.6 million has endured five years of  austerity with little of the unrest that has rocked Greece and  Spain and is now a much-needed success story for the EU, which  wants to show that the discipline of tax hikes and spending cuts  can work.      Irish debt yields have dropped from a 2011 peak of 15  percent to about 3.5 percent and the budget deficit has fallen  from nearly a third of gross domestic product in 2010 to an  estimated 7.3 percent this year.      That is still the highest deficit-to-GDP in the EU, partly  because Ireland's economy is barely growing and it needs growth  rates of 2-3 percent to make hefty national debt sustainable.      Unemployment, though falling, is above 13 percent and one in  five home loans, worth 25 billion euros, are not being fully  repaid. So all is not fixed.      The improvements have been enough to gain the government  some market access, highlighted by a 10-year bond issue in  March, but forgoing a precautionary line could leave it  vulnerable to future market shocks and unable to access the  ECB's government bond purchases scheme.Concerns also persist over the health of Ireland's banks and  the lenders are reviewing the quality of their assets - an  exercise conducted in advance of full Europe-wide stress tests  next year - before giving the final all clear to exit the  bailout.      But finances and commitment have improved enough to lift  Ireland to the brink of an exit.      "In Ireland, consumer confidence has improved and the  (building supplies) and DIY markets have stabilised at very low  levels of activity," said Gavin Slark, chief executive of  supplies group Grafton, which reported higher revenues  on Thursday.  

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