(1)

Upon a request by Ireland, the Council granted it financial assistance (Implementing Decision 2011/77/EU (2)) in support of a strong economic and financial reform programme aiming at restoring confidence, enabling the return of the economy to sustainable growth, and safeguarding financial stability in Ireland, the euro area and the Union.

(2)

In line with Article 3(9) of Implementing Decision 2011/77/EU, the Commission, together with the International Monetary Fund (IMF) and in liaison with the European Central Bank (ECB), has conducted the first review of the authorities’ progress on the implementation of the agreed measures as well as of the effectiveness and economic and social impact of those measures.

(3)

Under the Commission’s current projections for nominal GDP growth (– 3,6 % in 2010, 1,3 % in 2011, 2,8 % in 2012 and 4,0 % in 2013), the fiscal adjustment path is broadly in line with the Council Recommendation of 7 December 2010 with a view to bringing to an end the situation of an excessive deficit in Ireland, pursuant to Article 126(7) of the Treaty, and is consistent with a path for the debt-to-GDP ratio of 96,2 % in 2010, 112,0 % in 2011, 117,9 % in 2012 and 120,3 % in 2013. The debt-to-GDP ratio would therefore be stabilised in 2013 and be placed on a declining path thereafter, assuming further progress in the reduction of the deficit. Debt dynamics are affected by several below-the-line operations, including capital injection into banks in 2011 with net debt-increasing effect of around 6 percentage points of GDP, an assumption to maintain high cash reserves, and differences between accrued and cash interest payments.

(4)

The recapitalisation of Allied Irish Bank, Bank of Ireland, and EBS Building Society to a 12 % core tier 1 capital ratio (based on the 2010 Prudential Capital Assessment Review (PCAR)), which was to be done by February 2011, was postponed by the outgoing government due to the impending general elections.

(5)

On 31 March 2011, the Central Bank of Ireland announced the results of the PCAR and the Prudential Liquidity Assessment Review (PLAR). On the basis of these assessments, the four participating domestic banks (Allied Irish Bank, Bank of Ireland, EBS Building Society and Irish Life & Permanent) were found to need a total of EUR 24 billion in additional capital, including contingent capital of EUR 3 billion, to remain adequately capitalised under a stress scenario.

(6)

On 31 March 2011 the new government, which was formed following the elections held on 25 February 2011, announced its strategy to strengthen and reform the domestic banks, including by ensuring that the capitalisation need identified by the PCAR/PLAR exercise be met. This would bring domestic banks’ core tier 1 capital ratio by end July 2011 (subject to appropriate adjustment for expected asset sales in the case of Irish Life & Permanent) well above the level that had been envisaged to be reached by February 2011.

(7)

The Central Bank of Ireland should require Allied Irish Bank, Bank of Ireland, EBS Building Society and Irish Life & Permanent to meet a target loan-to-deposit ratio (LDR) of 122,5 % by end-2013, while avoiding the fire sale of assets. In addition, the Irish authorities should closely monitor the evolution of the Net Stable Funding ratio and the Liquidity Coverage ratio of the banks so as to ensure convergence with the standards emerging within the Basel III framework. The authorities should ensure that targets are achieved by establishing a credible framework for monitoring progress based on interim targets and appropriately incentivised governance arrangements within the banks.

(8)

Upon taking office, the new government launched a comprehensive review of expenditure to identify efficiency savings and to closely align the priorities underpinning the fiscal consolidation to those for national recovery set out in the Programme for Government (2011-2016) announced on 7 March 2011.

(9)

In light of these developments, Implementing Decision 2011/77/EU should be amended,

(1)

in paragraph 5, point (a) is replaced by the following:

(2)

paragraph 7 is amended as follows:

(3)

paragraph 8 is amended as follows: