On Wednesday, the International Monetary Fund (IMF) released a billion dollars of financial help to Ireland, as the country complied with the requirements set up in its 2010 bailout plan. The plan, which saved Ireland from bankruptcy after it suffered a massive banking crisis starting 2008, is reaching its end, as Ireland is getting ready to start issuing sovereign debt again in December. However, the country has to reach a minimum annual growth of 2% for its debt to become sustainable.
Ireland is now out of its second recession in five years with a 0.4% second quarter expansion. This positive data, however, falls short of the optimistic 1.3% growth over the entire year predicted by the Irish government. Irish exports have grown by 4.3% over the same period, while household consumption grew by 0.7%.
The IMF decision came almost one week after other good news for Ireland: on Friday, September 20, Moody's announced positive forecasts on Ireland's sovereign debt, which it now judges as "stable" instead of "negative", and now considers that the country's debt-ratio should become sustainable again. These forecasts, however, highly depend on Ireland's ability to maintain its austere economic policies and exportation rates. Before this announcement was made, Moody's was the only rating agency left to consider Ireland's debt as a speculative and unstable investment, as S&P and Fitch had positive and stable perspectives on Ireland's ratings. The change in the agencies' opinions seems to indicate that Ireland is now considered as financially sound, which should greatly impact the rate at which it will issue its new December bonds.
Ireland is reaching the end of its bailout program and seems to have found the path to economic stability. As such, it is a concrete example of what could happen to other bailed out European countries like Greece and Cyprus in the future. Moreover, this new Irish growth will have a positive impact on its partner economies in the European Union, which could in turn help other bailed-out countries.
- Mickael R'bibo