“The Irish authorities have pursued steadfast policy implementation for more than two years and positive results are emerging. Recent economic indicators suggest a nascent revival of domestic demand, Irish bond yields have fallen to pre-program levels, and the government’s market access has deepened, as seen in the successful issuance of 10-year bonds.

“Nonetheless, problem loans remain high and accelerating their resolution is a key to economic recovery. The recent establishment of mortgage loan restructuring targets for banks is therefore welcome, and it will be supported by reforms announced by authorities that facilitate constructive engagement between banks and borrowers, promote the efficiency of repossession procedures as a last resort, provide banks with the right incentives through provisioning rules, and by sound implementation of the personal insolvency reform. Progress with resolution efforts for SME loans is also a priority.

“Building on the strong budget outturn for 2012, sound budget execution remains critical in 2013, including continued vigilance on health spending and a successful introduction of the property tax. The fiscal consolidation path in coming years should be reviewed at the time of Budget 2014 to ensure that medium-term consolidation targets are achieved in a growth-friendly manner.

“Prospects for Ireland’s exit from official support have improved, yet continued strong policy implementation remains paramount given risks to medium-term growth and debt sustainability. Timely and forceful delivery on European pledges to improve program sustainability, especially by breaking the vicious circle between the banks and the Irish sovereign, would go a long way toward Ireland’s durable exit from drawing on official support.”