Ireland has a good chance of exiting its bailout this year, the International Monetary Fund said this afternoon.
It would benefit from more European support in cleaning up its indebted banks and the safety net of precautionary funding, the IMF said.
In contrast to much of the eurozone, Ireland’s economy has expanded for much of the past two years, and the IMF kept its growth forecasts for 2013 and 2014 unchanged, at 1.1% and 2.2% respectively.
The IMF said Ireland’s fiscal consolidation was going as planned, but European help in cleaning up the banking sector would help its long-term return to debt markets.
"The policy program of Ireland is sound and adjustment is being delivered, providing reasonably strong prospects for programme success," the IMF said in a review.
Ireland agreed to a detailed review of its troubled banks' loan books this year ahead of stress tests in 2014 and the IMF's Irish mission chief Craig Beaumont said that the first exercise was not expected to lead to a need for capital injections.
In a parallel review of the Spanish economy this afternoon, the IMF said Europe could also do its part there by quickly creating a banking union, helping to shore up a banking sector where bad loan rates were likely to rise further.
Overall, Spain had made strong progress in fixing its economy but needed to do more to cut high unemployment and shield the banks from recession, the IMF said.
The IMF also said it would not support calls by some politicians in Ireland to scale back targets for budget cuts and tax increases in 2014 and 2015 on the basis of savings from a bank debt deal struck with the European Central Bank (ECB) earlier this year.
Finance Minister Michael Noonan this afternoon said he may have some leeway in the next budget in October to either ease planned austerity or use the spare funds to invest in the economy.