IMF: Ireland could defer extra austerity until 2015

Ireland should defer additional austerity budgets until 2015 if the bailed-out country misses its economic targets next year, the IMF said. The International Monetary Fund authorised the release of 890 million euros ($1.17 billion) on Monday, the latest batch of an 85-billion-euro EU-IMF bailout programme entered in 2010 after the collapse of the country's economy. Dublin has now drawn down over 19 billion euros of the 22 billion of IMF loans available under the bailout programme. David Lipton, First Deputy Managing Director of the IMF, said Dublin had strongly implemented the programme and had hit all its targets. The IMF predicted Dublin would comfortably hit the 8.6 percent gross domestic product (GDP) deficit target for 2012, despite a slowdown in growth in the second half of the year. However, Lipton warned a more gradual economic recovery is projected, with growth of 1.1 percent in 2013 and 2.2 percent in 2014, with public debt expected to peak at 122 percent of GDP in 2013. "This baseline outlook is subject to significant risks from any further weakening of growth in Ireland's trading partners, while the gradual revival of domestic demand could be impeded by high private debts, drag from fiscal consolidation, and banks' still limited ability to lend," he said in a statement. "Nonetheless, if next year's growth were to disappoint, any additional fiscal consolidation should be deferred to 2015 to protect the recovery," Lipton added. Earlier this month, Dublin announced its sixth consecutive austerity budget aimed at making an adjustment of 3.5 billion euros via painful taxation hikes and public spending cuts. Lipton said Ireland's market access would also be greatly enhanced by "forceful delivery of European pledges" to improve the sustainability of the programme, especially by "breaking the vicious circle between the Irish sovereign and the banks". Dublin is seeking to transfer the public debt used to rescue Irish banks to the new eurozone bailout fund, the European Stability Mechanism (ESM), but so far EU leaders have failed to sanction such a deal.