The high unemployment rate in Ireland remains one of the key challenges in our economic recovery, according to the European Commission.
In a post surveillance review, the Commission says the high level of public and private debt - and the substantial number of poor performing loans on banks balance sheets - are also of concern.
It notes that it will take several years for this situation to be rectified.
"Further progress is required in several areas to complete the adjustment process and to achieve balanced and sustainable growth. In particular, in view of still very high government and private indebtedness, coupled with a large stock of impaired assets in the domestically owned banks, Ireland needs to continue with fiscal consolidation, reduce the private sector debt overhang, and further progress with financial sector repair to safeguard and strengthen the economic recovery" it says.
It also adds that while economic growth turned out lower than expected in 2013, the outlook for this year and next "is improving".
"High-frequency indicators continue to point to a solid recovery in 2014" the report says.
The Commission projects that GDP growth will rise to 1.7% in 2014 and 3% in 2015, with inflation expected to remain muted.
The review adds that while our fiscal programme is still on course the political pressures on the budget is increasing.
"The government remains committed to sustainably correct the excessive deficit by 2015 and achieve a balanced budget by 2018. Measures needed to
meet the 2015 EDP target of 2.9% of GDP have not been detailed and are expected to be announced in October with the draft budget" it adds.
In banks, it believes that the performance of the three main domestic institutions continues to improve. "The banks' capital ratios are above the regulatory minimum and
though non-performing loans (NPLs) remain very elevated, provision for their coverage are relatively high".
