In its eighth review of the EU-IMF financial assistance programme for Ireland, the European Commission said that implementation of the programme remains on track.

In a statement, the Commission said that talks during its last review here were, as usual, frank and constructive, but underscored that key risks and challenges remain for the economy.

The report said that all fiscal targets have been met and progress on financial sector reform continues.

It noted that key legislative changes - including new personal insolvency legislation - complement progress on deleveraging and  restructuring which will bring banks closer to a return to profitability.

But it cautioned that concerns remain on the prospects of banks' profitability in the medium term and the scarcity of new lending to underpin economic activity. 

Other challenges facing the banking sector include how to address the growing level of mortgage arrears.

The Troika stated that failure to act decisively on mortgage arrears would pose increased risks to banks' future capital positions.

On the labour market, the Troika said that progress continued on reforming labour market activation policies but it urged the Government to speed up and extend these policies' coverage so as they reach a greater share of the long term unemployed.

Progress was also noted on water service provision. But as work has yet to start on installing meters, the Troika said the Government is worried that there will be resistance to introduce charges ahead of a full roll out of meters.

The report noted that overruns in the health sector still pose a threat to the economy, and the Troika stressed the need to ensure that any measures the Government takes are ''durable and growth friendly and that they minimise the burden of adjustment on the most vulnerable''.

The joint EC/ECB/IMF mission visited Dublin in October. After its visit, the Troika revised downwards its forecast for real GDP growth in 2013 due to the lower pace of economic activity in most of Ireland's trading partners and weaker domestic demand.

The successful completion of the review enables a disbursement of €0.8 billion from the European Financial Stability Fund / European Financial Stability Mechanism, €0.9 billion from the IMF and €0.5 billion from the UK under its bilateral loan deal.

This brings total disbursements from the EU, IMF and bilateral partners to €56.6 billion - 84% of the total international assistance of €67.5 billion available under the programme.