The International Monetary Fund has said that it is urging the European Union and the ECB to restructure the Anglo Irish Bank promissory notes.
It says such a restructuring would improve Ireland's debt sustainability, and help the country return to market funding next year.
The IMF deputy mission chief to Ireland, Craig Beaumont, said that because of market uncertainty surrounding the Euro area and Ireland's debt dynamics, the IMF was encouraging the EU to "proactively take steps to re-enforce the prospects of Ireland gaining adequate market access in 2013".
He confirmed that this meant a restructuring of the promissory note arrangement. He said such steps could help Ireland avoid ongoing reliance on official funding and contribute to European economic stability.
Mr Beaumont said he could not quantify the effect such a restructuring could have, but he said it would re-enforce Irish debt sustainability.
He said discussions on the promissory note issue were making good progress, and that a substantial amount of time had been spent on the issue. But he said there was no deadline on the matter, despite a payment of €3.1 billion on the promissory note falling due at the end of the month.
He said market access was still possible for Ireland in 2013, but he said the risks that this might not happen were still high, and the IMF would like to reduce those risks.
He also said he did not anticipate any impact on Ireland's bail-out programme from the Government's decision this week to call a referendum on Europe's new fiscal treaty and said that so far it had not created much additional uncertainty.
IMF gives Ireland a good score card on programme
In its fifth review of Ireland's bail-out programme, the International Monetary Fund said that the 2011 targets were met - or exceeded - but warned that the economy faces greater external and domestic challenges than expected.
It said the country's growth outlook has deteriorated as export prospects are hit by the predicted euro zone recession, while a bigger fall in consumer spending is expected because of house price falls and the level of debts in Irish households.
The IMF said the growth projected for this year has been revised down to 0.5% with the expected euro zone recession expected to slow the country's export growth to 2.75%. It said, however, the slowdown will be cushioned by the resilience of pharmaceuticals and IT services and by the continuing improvements in competitiveness.
The report said that only exports to the UK held up well during the year, with industrial and agricultural exports growing by 4.5% and 17% year on year respectively.
The IMF said that the country's unemployment rate remains unacceptably high at over 14% and added that the economic slowdown in other euro zone countries is making it more difficult for Ireland to fully recover from its housing bust in 2008.
The Fund noted that during the period examined, strong implementation of financial sector reforms continued. However, it said that further efforts are need to make sure that the country's banks become healthy enough to contribute to Ireland's sustained economic recovery.
The IMF also said that the country remained on target to reduce its budget deficit to 8.6% of GDP and again urged the Government not to ramp up its austerity plans for this year, even if there is a further reduction in growth projections.
The European Commission had taken a very different view in its latest report earlier this week when it said the Government may need to make changes to its budget this year if the economy continues to deteriorate.
Instead the IMF favours reconsidering plans for 2013-15 if there is a major economic shock, saying such an approach would preserve the credibility of Ireland's medium-term targets.
The IMF still expects Ireland's debt to GDP ratio to peak at just above 118% next year, a touch better than the Government's 119%. But it warned: "The debt trajectory is vulnerable to lower medium-term growth. For example, debt would reach 138% of GDP by 2016 if growth were to stagnate."
It also welcomed today what it described as Ireland's "innovative approach" to tackling household debt through new debt settlement and bankruptcy laws.
