Ireland will have to continue to be monitored by the International Monetary Fund even if it leaves the European Central Bank’s bailout programme, it has emerged.
Ireland was part of the beleaguered trio of countries (Ireland, Greece and Portugal) which were bailed out by the EU throughout 2010 and 2011. The bailout programme, which cost €67.5 billion, has helped the country to recover and economical progress over the past few years has made Ireland become more stable.
However, once Ireland exits the bailout programme – which is looking ever more likely, given that Greece and Portugal are still struggling – Ireland will still have to submit to monitoring by the International Monetary Fund. It can only depart from the bailout programme if it subscribes to a safety measure programme from the Euro zone, designed to provide credit should things go awry. Additionally, Ireland needs to protect itself against those who renege on bonds, and the European Central Bank’s promise to guard unlimited purchases of debt in secondary markets can do this. This has led to the introduction of the International Monetary Fund’s watchful eye.
The jump from bailout programme to monitored programme could appear to some as though Ireland still has little control over its own financial destiny. However, whichever the method, Ireland would still have to rely on others for funding; private markets would have to provide the necessary funding for Irish institutions to survive regardless.
The deficit in Ireland’s budget has not decreased for its high level of 7.5% GDP, and the debt of the government has hit the high note of 125% GDP. The real cost, however, is even more than this amount, because the debt that makes up part of the GNP (which Irish residents draw from) is more than 150%.
The revelations come as Angela Merkel begins her fight for her third term in the September elections. The Eurozone economy may well be moving out from the recession, but the bailout programmes will not be unfolding entirely as planned, and this may negatively affect the EU and the upcoming elections.
For further information on the Irish bailout situation and how it will affect other EU countries such as Portugal and Greece, please read my Slide Share.