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EU bailout team urges caution on public finances

Representatives from the European Commission and the European Central Bank completed a three-day post-programme surveillance mission today
Representatives from the European Commission and the European Central Bank completed a three-day post-programme surveillance mission today

An EU bailout team has urged caution over Ireland's public finances, after its latest post-bailout visit to the country.

Representatives from the European Commission and the European Central Bank completed a three-day post-programme surveillance mission today.

In its report the team warned that planned increases in public spending this year could increase the budget deficit "unless they are matched by higher than anticipated revenues".

Despite describing Ireland's economic recovery as "remarkable", the report also expressed concern over further tax cuts planned by the Government and highlighted that there is "scope for broadening the tax base" to avoid an adverse impact on revenue.

This comes amid Government plans to set up an independent commission to look at the issue of water charges here.

According to the report, cost effectiveness remains a challenge in the area of healthcare, especially with regard to hospitals and pharmaceuticals.

It also highlights that although the share of non-performing loans in Irish banks has fallen from 27.1% in 2013 to 16.1% at the end of last year, "it remains among the highest in the euro area".

In addition, the two thirds of mortgages in long-term arrears are viewed as an issue, with the bailout team saying banks need to continue with restructuring loans and the sustainability of restructuring solutions.

The report also states the introduction of the planned credit register, which the Central Banks says will not be in operation until at least next year, would improve lending standards.

Meanwhile, bottlenecks in the areas of housing and infrastructure "need to tackled more ambitiously", according to the EC/ECB representatives.

The Government is also urged to take advantage of the "current favourable economic and financial conditions" and reduce the country's debt burden.

Selling State-owned shares in Irish banks is suggested as a method to further reduce debt.