Ireland has officially exited its eurozone bailout program as of today, Reuters reports. In a landmark moment for the European Union, the first of the countries bailout out during the financial crises has made the choice to leave its bailout program. Ireland has officially exited its bailout package, marking its return to financial independence in a move hailed as a victory for the Irish and for other European officials alike.
Ireland got into trouble several years ago when its banking sector collapsed in the midst of a housing bubble. Banks were left with gaping holes in their balance sheets, and they faced a serious risk of insolvency if funds were not made available. With borrowing costs rising rapidly for the government, the country made its choice to accept an 85 billion euro bailout package in order to save its financial system. Now, Ireland is ready to emerge from that bailout and put its government and its banks back on the market.
For the government, at least, the cost of borrowing is well below the outrageous 15 percent levels seen during the height of the crisis. Currently, the government is able to borrow at 3.5 percent, reflecting a high level of confidence in the country’s ability to repay its loans. Having access to capital markets at reasonable interest rates is key to Ireland’s exit, as it seeks to return to a more normalized system of issuing bonds on the open market.
For the country’s banks, there may still be further difficulties ahead. Irish banks will not be spared from the stress tests and the asset quality review that the European Central Bank plans to conduct on all European banks as part of its review of the continent’s financial sector. The Bank of Ireland, one of the country’s largest lenders, was recently informed by the government that a national review revealed millions of euros of capital shortfalls. The bank disputes the findings, claiming that certain industry-wide standards are being applied to the bank in error without proper consideration of its specific circumstances.
Michael Noonan, the Irish finance minister, has received virtually universal praise for his handling of the situation. Noonan has said that he may consider tax cuts if the Irish economy needs a stimulus and if the budget can provide for it. However, many have issued words of caution for the Irish government, noting that the country’s total debt load remains well above 100 percent of gross domestic product. The country’s cash reserves — which total over 20 million euros — have beat out expectations in allowing Ireland to have a policy buffer, at least in the short term.
Still, things are far from pre-crisis levels in the country. The housing market has far from recovered from its devastating collapse. Workers are facing lower salaries and fewer job openings. What was once a hub of immigration is now plagued by emigration, especially of the country’s young people. It is clear that, while today’s achievement marks a milestone in Irish history, there is still much work to be done.
Don’t Miss: New Poll: What’s in the Future for Congress.