Staff teams from the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) visited Dublin from 5 to 15 April for the first quarterly review of the Irish Government’s economic programme. The objectives of the programme are to address financial sector weaknesses and to put Ireland’s economy on a path of sustainable growth, sound public finances and job creation. Maintaining social fairness in shouldering the burden of adjustment is one of the programme’s priorities.

The teams’ assessment is that the programme is on track, but challenges remain and steadfast policy implementation will be key.

Ireland is making good progress in overcoming the worst economic crisis in its recent history. The implementation of the programme has been determined, despite the period of political change and an uncertain external environment. The new government, through its Programme for Government and its decisive approach to banking sector reforms, has taken full ownership of the goals and key elements of the programme supported by EU and IMF.

The Central Bank has resolved that Ireland’s banks will not be able to challenge the findings this week of crunch stress tests, an exercise which will clear the way for the fifth bank bailout since the 2008 guarantee.

The participating institutions – Bank of Ireland, Allied Irish Banks, Irish Life Permanent and the Educational Building Society – will not be able to seek any lower loan loss estimates in the tests or revised capital requirements.

The tests are expected to show a further capital hole at the lenders of between €18 billion and €23 billion. This could push State injections into the banks from €46 billion to between €64 billion and €69 billion.

Annual declines in GDP and GNP

Preliminary estimates for the year 2010 indicate annual declines of 1.0 per cent in GDP and 2.1 per cent in GNP. While 2010 is the third year of falling output the annual rate of decline in both GDP and GNP has moderated compared with the 2008 and 2009 results. On a seasonally adjusted basis, constant price GDP for the fourth quarter of 2010 fell by 1.6 per cent compared with the previous quarter while the corresponding quarterly change for GNP was an increase of 2.0 per cent.

EMERGENCY LOANS to Irish banks rose by as much as €19 billion last month as the European Central Bank (ECB) changed collateral rules, forcing the lenders to borrow more from the Irish Central Bank.

The banks increased their borrowing under exceptional liquidity assistance (ELA) to as much as €70.1 billion at February 25th from €51.1 billion in late January. A further €116.9 billion was borrowed by the banks at the ECB, a decrease from €126 billion the previous month.

This brought the borrowings of the banks in Ireland from the central banks in Frankfurt and Dublin to €187 billion, a net increase of €10 billion during the month.