COMMISSION STAFF WORKING PAPER Ireland financial assistance programme documents   Accompanying document to the   Proposal for a  COUNCIL DECISION  on granting Union financial assistance to Ireland    COM(2010) 730 final
Date: 2010-12-03
Institutions: European Commission
Subjects: EU aid, Ireland, economic stabilisation, financial aid, macroeconomics, reflation

EN 

EUROPEAN COMMISSION 

Brussels, 3.12.2010 
SEC(2010) 1516 final 

COMMISSION STAFF WORKING PAPER 

Ireland financial assistance programme documents 

Accompanying document to the 

Proposal for a 

COUNCIL DECISION 

on granting Union financial assistance to Ireland 

COM(2010) 730 final 

 
 
  
 
 
 
 
 
 
 
 
 
Ireland Financial Assistance Programme  

1.  Letter from Irish authorities 

2.  Memorandum of Economic and Financial Policies 

3.  Table of fiscal measures 

4.  Financing needs 

5.  Memorandum of Understanding on Specific Economic Policy Conditionality 

6.  Technical Memorandum of Understanding 

7.  Detailed macroeconomic projections  

3 

6 

15 

18 

19 

39 

42 

EN 

EN 

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Dublin, December xx, 2010 

Mr Jean-Claude Juncker 
President  
Eurogroup 

Mr Didier Reynders 
European Union Presidency 

Mr Olli Rehn 
Commissioner  
European Commission 

Mr Jean-Claude Trichet 
President  
European Central Bank 

Dear Messrs. Juncker, Reynders, Rehn and Trichet, 

1.      
Ireland faces an economic crisis without parallel in its recent history. The problems of 
low growth, doubts about fiscal sustainability, and a fragile banking sector are now feeding 
on  each  other,  undermining  confidence.  To  break  this  vicious  circle,  we  are  proposing  a 
strong,  wide-ranging,  reform  programme,  backed  by  a  substantial  international  financing 
package, to restore confidence and return the economy to a path of sustained growth and job 
creation. 

2.       At the root of the problem is a domestic banking system, which at its peak was five 
times the size of the economy, and now is under severe pressure. The Irish owned banks were 
much larger than the size of the economy. The fragility of the banking sector is undermining 
Ireland’s  hard-earned  economic  credibility  and  adding  a  severe  burden  to  acute  public 
finance  challenges.  Decisive  actions  to  restore  the  strength  of  the  financial  sector  and  re-
establish fiscal credibility are needed now.  

3.       The Irish authorities have already undertaken major steps to address these challenges. 
For the financial sector, these include measures to facilitate funding of banks, separate good 
assets  from  bad,  asset  disposals,  and  bank  recapitalisation.  On  the  fiscal  side,  we  have 
pursued  a  large  consolidation  programme  since  2008  and  have  announced  a  National 
Recovery Plan that accelerates the process of putting public finances on a sound footing. 

4.       But  we  recognize  that  more  needs  to  be  done.  A  fundamental  downsizing  and 
reorganisation  of  our  banking  system  is  essential.  We  are  immediately  undertaking  several 
bold  measures  to  achieve  a  robust,  smaller,  and  better  capitalised  banking  system  that  will 
effectively  serve  the  needs  of  the  economy.  Restoring  the  banks  to  viability  will  also  help 

 
 
 
 
 
 
 
 
 
 
 
3 

insulate  public  finances  from  further  pressures.  We  are  mindful  that  the  transition  to  a 
healthy  banking  sector  will  need  to  be  actively  managed  to  avoid  fire  sales  of  assets  and 
reduce  market  uncertainty.  We  are,  therefore,  expeditiously  raising  capital  standards, 
stepping up efforts that will ensure that banks losses are promptly recognised, and creating a 
mechanism to inject needed capital into the banks.    

5.      
In  addition,  we  are  also  pressing  ahead  with  our  commitment  to  achieving  a 
sustainable budget position. The National Recovery Plan lays out our strategy for staying the 
course  of  needed  reform  in  a  way  that  is  socially  fair  and  protects  the  most  vulnerable. 
Recognising that Ireland already has put in place a business-friendly environment, our Plan 
also  lays  out  a  range  of  structural  reforms  that  will  be  implemented  to  underpin  economic 
stability, and enhance growth and job creation. 

6.       We turn to our European and international partners for support as we implement these 
far-reaching objectives. We therefore request support from the European Financial Stability 
Mechanism/European Financial Stability Facility which can be drawn down over a period of 
36  months  as  well  as  bilateral  loans  from  the  United  Kingdom,  Sweden  and  Denmark;  the 
overall total of this support will be €45 billion.  We also send a parallel request for financial 
assistance  to  the  IMF  for  a  total  amount  of  €22.5  billion..  The  judi cious  use  of  our  own 
existing  financial  resources  (€17.5  billion)  will  also  help  ensure  financial  stability  as  we 
restore market confidence and return to durable growth.  

7.       The  attached  Memorandum  of  Economic  and  Financial  Policies  outlines  the 
economic  and  financial  policies  that  the  Irish  Government  and  the  Central  Bank  will 
implement  during  the  remainder  of  2010  and  the  period  2011–13  to  strengthen  Ireland’s 
banking  sector  and  fiscal  position.  An  annexed  Memorandum  of  Understanding  (MoU) 
specifies  detailed  economic  policy  measures  that  will  serve  as  benchmarks  for  assessing 
policy  performance  in  the  context  of  the  quarterly  reviews  under  the  financial  assistance 
programme. We are confident that the policies set forth in these memoranda are adequate to 
achieve the objectives under the programme. We stand ready to take any corrective actions 
that may become appropriate for this purpose as circumstances change.  

8.       The  implementation  of  our  programme  will  be  monitored  through  quantitative 
performance  criteria  and  structural  benchmarks  as  described  in  the  attached  MEFP,  and 
through  the  detailed  and  specific  economic  policy  criteria  in  the  MoU.  There  will  be 
quarterly reviews of the arrangement, in coordination with the IMF. The reviews will assess 
progress  in  implementing  the  programme  and  reach  understandings  on  any  additional 
measures that may be needed to achieve its objectives. 

9.       The  programme  is  designed  such  that  it  best  reflects  the  interest  of  Ireland  and  the 
international community. We have explored options for the provision of collateral for support 
under the EFSF and found legal and economic constraints that would risk undermining the 
goals  of  the  programme.  The  conditionality  under  the  programme  provides  substantial 

 
 
4 

comfort  that  the  programme  will  be  delivered  and  that  the  support  will  be  repaid.  We  will 
ensure  that  the  financial  assistance  in  the  context  of  the  EFSM  and  EFSF  and  bilateral 
lenders  to  be  provided  to  Ireland  will  be  subject  to  the  loan  terms  and  conditions  that  will 
protect the EU's and the euro-area and EU Member States' financial and legal interests in a 
non discriminatory way as compared to the assistance provided by the EU to other Member 
States under its Balance of Payments facility and for the EFSF adapted to take into account 
its structure and credit enhancement mechanism. 

10.       The  Irish  authorities  believe that  the  policies  set  forth  in  the  attached  memorandum 
are adequate to achieve the objectives of our economic programme, but stand ready to take 
any further measures that may become necessary for this purpose. The authorities will stay in 
close  contact  and  consult  with  the  European  Commission,  the  ECB  and  the  IMF  on  the 
adoption of these measures and in advance of revisions to the policies contained in the MEFP 
and  the  MoU.  All  available  information  requested  by  the  European  Commission,  the  ECB 
and the IMF to assess implementation of the programme will be provided. 

We are copying this letter to Mr. Strauss-Kahn, Managing Director of the IMF. 

Sincerely, 

/s/ 

/s/ 

_________________   
     Brian Lenihan  
  Minister for Finance  

_________________   
    Patrick Honohan 
           Governor of the Central Bank of Ireland 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 

Memorandum of Economic and Financial Policies 
1.       We have concluded that Ireland expeditiously requires a strong programme to restore 
domestic and external confidence and, thus, snap the pernicious feedback loops between the 
growth, fiscal, and financial crises.  

2.       We propose that such a programme comprise of four key elements: 

• 

• 

• 

• 

A fundamental downsizing and reorganisation of the banking sector—complemented 
by the availability of capital to underpin solvency—is required to restore confidence. 
Addressing  market  perceptions  of  weak  bank  capitalisation,  overhauling  the  banks’ 
funding  structure,  and  immediately  beginning  a  process  of  downsizing  the  banking 
system will be required. 

An ambitious fiscal consolidation building, on the progress already made.  

Renewing growth through a multi-pronged effort.  

A substantial external financial assistance will support the achievement of our policy 
objectives. 

Recent Economic Developments and Outlook 

3.       After two years of sharp declines in output, the Irish economy is expected to broadly 
stabilise this year before expanding during 2011–14. As domestic imbalances from the boom 
years are being repaired, the recovery will, at least initially, be primarily export-driven. We 
project  that  GDP  growth  will  increase  over  time  as  export  performance  filters  through  to 
investment  and  consumption,  consumer  confidence  returns,  and  labour  market  conditions 
improve.  We  recognise  that  the  risks  in  the  short  term  are  tilted  to  the  downside,  and,  in 
particular, the headwinds from fiscal consolidation on domestic demand could be larger than 
anticipated.  Over  the  longer  haul  also,  continued  private  and  public  sector  balance  sheet 
adjustments, coupled with a weak banking sector, could delay the recovery. 

4.      
Inflation  is  expected  to  remain  low,  reflecting  the  large  output  gap  and  modest 
external  price  pressures.  Although  the  inflation  rate  will  likely  increase  over  time,  it  is 
expected  to  remain  lower  than  in  trading  partner  countries.  This  will  have  the  benefit  of 
improving  competitiveness  but  the  low  rates  of  inflation  would  unavoidably  keep  real  debt 
burdens high and dampen domestic demand.  

5.       The  current  account  balance  is  projected  to  continue  to  improve  gradually  over  the 
medium term, reflecting export expansion and the contraction in domestic demand. However, 
profit repatriation from multinationals and large interest payments to foreign holders of Irish 
debt are expected to limit the improvement over the programme period. 

 
 
Restoring Financial Sector Viability  

6 

6.       With its large size relative to the economy, its heavy reliance on wholesale funding, 
and its large exposures to the real estate sector, much of the domestic Irish banking system is 
in a stressed state. The Government has intervened heavily to safeguard financial stability. In 
late 2009,  we  established  the  National  Asset  Management  Agency  (NAMA)  to  take  over 
certain vulnerable commercial and property development assets of banks. In addition, major 
efforts have been made to boost banks’ capital. 

7.       Although  the  Government  has  made  strong  efforts  to  contain  the  fallout  from  the 
sector’s  vulnerabilities,  a  continued  lack  of  market  access  and  the  loss  of  deposits  have 
created  significant  funding  pressures,  alleviated  largely  by  an  increase  in  recourse  to 
Eurosystem  financing  facilities  and  Emergency  Liquidity  Assistance  by  the  Central  Bank. 
Moreover, capital injections in the banks have placed a heavy burden on public finances.  

8.       Our proposed programme will take decisive steps to ensure the viability and health of 
the financial system. We intend to lay the foundations of this process very quickly, if we are 
to reassure the markets that banks will return to viability and will have the ability to operate 
without further state support in a reasonable period of time. 

9.       The  key  component  of  our  efforts  is  an  overhaul  of  the  financial  sector  with  the 
objective of substantial downsizing, isolating the non-viable parts of the system and returning 
the sector to healthy functionality. It will be important to support this process through capital 
injections  into  viable  financial  institutions.  In  addition,  structural  measures—a  special 
resolution  scheme  for  deposit-taking  institutions  and  a  further  strengthening  of  the 
supervisory system—will impart greater stability to the system. It is our goal that the leaner 
and  more  robust  system  that  emerges  from  these  efforts  will  not  be  dependent  on  state 
support, will have a more stable funding base, and will provide the credit required to foster 
growth.  

10.       The  plan  to  overhaul  the  banking  system  has  several  elements.  First,  banks  will  be 
required to run down non-core assets. Second, land and development property loans that have 
not yet been transferred to NAMA will also be transferred. Third, banks will be required to 
promptly and fully provide for all non-performing assets as needed. Fourth, the banks will be 
required  to  securitise  and/or  sell  asset  portfolios  or  divisions  with  credit  enhancement  if 
needed, once the market normalises. And finally, swift and decisive action will be taken to 
resolve  the  position  of  Anglo  Irish  Bank  (Anglo)  and  Irish  Nationwide  Building  Society 
(INBS) in a way that protects depositors and strengthens the banking system. To this end, by 
end-January 2011, we will submit to the European Commission a revised proposal developed 
in collaboration with IMF, to resolve Anglo and INBS. Each of these initiatives will require 
technical or legislative measures, most of which we believe can be expeditiously instituted. 

 
 
 
7 

11.       To  achieve  the  above  goals,  banks  will  be  required  to  submit  deleveraging  plans  to 
the  national  authorities  by  end-February 2011.  The  plans  will  be  prepared  on  the  basis  of 
clear  periodic  targets  defined  by  the  Central  Bank,  taking  into  consideration  the  Prudential 
Liquidity Assessment Review (PLAR) to be conducted in consultation with the EC, ECB and 
IMF.  By  end-March 2011,  the  Central  Bank  with  assistance  from  an  internationally 
recognised  consulting  firm,  will  complete  the  assessment  of  the  banks’  restructuring  plans 
(structural  benchmark).  The  deleveraging  plans  will  be  a  component  of  the  restructuring 
plans to be submitted to the European Commission for approval under EU competition rules.  

12.       This reorganisation and downsizing of the banks will be bolstered by raising capital 
standards. While we expect that, in a restructured system, banks will be able to raise capital 
in the market, we recognise that the higher standards may imply that, in the short run, public 
provision of capital  will be needed for banks that are deemed to be viable. To support this 
process—and to render it credible—we will undertake a review of the capital needs of banks 
on  the  basis  of  a  diagnostic  of  current  asset  valuations  and  stringent  stress  tests  (PCAR 
2011).  

• 

• 

• 

As an immediate step, to enhance confidence in the solvency of the banking system, 
the Central Bank will direct Allied Irish Bank (AIB), Bank of Ireland (BoI) and EBS 
to  achieve  a  capital  ratio  of  12 percent  core  tier  1  by  end-February  2011  (structural 
benchmark)  and  Irish  Life  &  Permanent  by  end-May  2011  (structural  benchmark). 
This  would  imply  an  injection  of  fresh  equity  capital  of  €7bn  in to  these  four  banks 
and  provide  an  additional  buffer  for  a  potential  increase  in  expected  losses.  This 
action,  along  with  early  measures  to  support  deleveraging  and  taking  account  of 
haircuts on the additional loans to be transferred to NAMA (see ¶10) would result in 
an injection of €10bn of fresh capital in to the banking system, above and beyond the 
already committed  capital injection of €6.6bn  for  AIB  previously  announced  by  the 
Irish authorities. 

By end-December 2010, in consultation with EC, ECB, and IMF staff, we will define 
the criteria to run stringent stress test scenarios (structural benchmark). We will also 
agree  with  EC,  ECB,  and  IMF  staff,  by  end-December  2010,  on  draft  terms  of 
reference for the due diligence of bank assets by internationally recognised consulting 
firms  (structural  benchmark).  We  intend  to  complete  the  diagnostic  evaluation  of 
banks’  assets  by  end-March 2011  and  the  stress  tests  (PCAR  2011)  by  end-
March 2011  (both  structural  benchmarks),  and  transparently  communicate  our 
findings.  

Based  on  these  assessments,  starting  end-April 2011,  banks  will  be  required  to 
maintain  a  core  tier  1  capital  ratio  of  10.5 percent.  Banks  will  report  their  capital 
adequacy  ratios  to  the  Central  Bank  on  a  quarterly  basis.  The  Central  Bank’s 
assessment  of  banks’  capital  adequacy  ratio  will  be  made  public  at  least  semi-
annually.  

 
 
8 

13.       The question of whether burden should be imposed on bank sub debt is influenced by 
two factors: the quantum of capital the State has committed to support the institution and the 
perceived  viability  of  the  bank  in  the  absence  of  receiving  such  capital.  Forced  burden 
sharing  through  legislation  is  possible  and  legislation  is  currently  being  prepared  in  this 
regard.  Alternatively,  in  certain  cases,  a  very  deeply  discounted  liquidity  management 
exercise might also be an appropriate option.  

14.       In addition, we will finalise proposals to strengthen the legal framework for dealing 
with distressed deposit-taking institutions in line with recent EU developments (including EU 
competition  rules)  and  international  sound  practices.  Such  a  special  resolution  regime  will 
broaden  the  available  resolution  tools  with  the  aim  of  promoting  financial  stability  and 
protecting depositors. In particular, the draft legislation will (i) provide for the appointment 
of  a  special  manager  where,  in  the  opinion  of  the  Central  Bank,  an  institution's  financial 
condition has severely deteriorated; (ii) grant powers to the Central Bank for the transfer of 
assets and liabilities to other institutions; and (iii) create a framework for the establishment of 
bridge banks. We seek to submit draft legislation including the above-mentioned elements to 
Dáil Éireann by end-February 2011 (structural benchmark). 

15.       Moreover, we will continue the efforts to strengthen banking supervision by ensuring 
higher  staffing  levels  and  budget  allocations  in  line  with  OECD  best  practices.  We  will 
enhance  the  risk  assessment  framework  and  raise  the  corporate  governance  standards.  By 
end-September 2011, a report by an independent assessor on our compliance with Basel core 
principles for effective banking supervision will be made public.  

16.       We  will  also  reform  the  personal  insolvency  regime  for  financially  responsible 
individuals  (including  sole  traders),  which  will  balance  the  interests  of  both  creditors  and 
debtors.  The  objectives  will  be  to  lower  the  cost  and  increase  the  speed  and  efficiency  of 
proceedings,  while  at  the  same  time  mitigating  moral  hazard  and  maintaining  credit 
discipline.  The  new  legal  framework  will  include  a  non-judicial  debt  settlement  and 
enforcement mechanism as an alternative to court-supervised proceedings. 

17.       We will continue to provide means-tested financial assistance to limit the economic 
and social fallout of the crisis. The existing mortgage interest supplement scheme is crucial 
for  providing 
to  distressed  mortgage  holders.  The  scheme’s 
administration  will  be  centralised  to  ensure  a  more  consistent  application  focusing  on 
households  that  are  most  in  need,  and  further  modification  will  be  introduced  in  the  2011 
Social Welfare Act.  

temporary  assistance 

18.       Our strategy for the credit union sector is based on three components. First, we will 
complete a full assessment of their loan portfolios by end-April 2011 (structural benchmark). 
Second,  by  end-April  2011,  we  will  have  ready  a  comprehensive  strategy  to  enhance  the 
viability  of  the  sector.  And  third,  by  end-December  2011  we  will  submit  legislation  to 

 
 
9 

Dáil Éireann to assist the credit unions with a strengthened regulatory framework including 
effective governance and stabilisation requirements. 

19.       We will continue efforts to ensure the flow of credit to viable businesses, building on 
actions  already  taken  under  previous  recapitalisations  and  NAMA  legislation.  Allied  Irish 
Banks  and  Bank  of  Ireland  have  agreed,  in  connection  with  recapitalisation  last  March,  to 
make available not less than €3 billion each for 
targeted lending for new or increased credit 
facilities to small and medium-sized enterprises in both 2010 and 2011 as well as funds for 
seed and venture capital and for Environmental lending. The lending policies and decisions 
of both banks are subject to review by the Credit Review Office, which enables businesses 
who have had credit refused or withdrawn, to apply for an independent review of the bank’s 
decision.  

20.       NAMA is subject to an extensive range of statutory Governance and Accountability 
arrangements and these will be fully adhered to. Members of the NAMA Board must have 
relevant experience and expertise, and the work of the Board is supported by audit and other 
sub-committees. NAMA operations are also subject to statutory codes of practice. NAMA is 
required to prepare various reports, including quarterly reports of its activities, and these are 
subject to scrutiny by Oireachtas committees. The Comptroller and Auditor General audit the 
annual  accounts  and  prepare  reports  on  NAMA  for  review  by  the  Public  Accounts 
committee. 

Safeguarding Public Finances  

21.       To  continue  with  the  programme  of  fiscal  consolidation,  a  comprehensive  National 
Recovery  Plan  2011-14  was  approved  by  the  Government  and  published  on  24  November 
2010.  This  Plan  forms  the  basis  for  the 2011  budget  consistent  with  fiscal  consolidation 
measures amounting to €15 billion,  a 9 percent of GDP budgetary correction over the period 
2011–14. Having stabilised the deficit, albeit at a high level, the steps announced in the Plan 
will place the budget deficit-to-GDP ratio on a firm downward path. While the debt-to-GDP 
ratio  will  remain  at  high  levels  for  the  next  few  years,  it  is  projected  to  decline  thereafter, 
underpinning  debt  sustainability.  We  also  propose  to  keep  under  review  progress  towards 
meeting the Stability and Growth Pact targets.  

22.       Budget 2011 which will include adjustment measures of €6 billion, will be submitted 
to  the  Dáil Éireann  for  passage  on  7  December  (prior  action).  As  set  out  in  the  National 
Recovery  Plan,  most  of  this  adjustment  will  come  from  the  expenditure  side.  The  capital 
budget  will  be  reduced,  partly  through  greater  value  for  money  in  our  infrastructure 
procurements.  On  current  expenditures,  we  are  pursuing  public  service  numbers  reductions 
through natural attrition and voluntary schemes, adjustments in public service pensions, and 
further savings on social transfers (from reductions in working age payments, reductions in 
universal child  benefit payments  and other reforms). Protecting the socially vulnerable at a 
time of difficult economic adjustment remains a central policy goal. Current savings will also 

 
 
10 

through  administrative 
be  realised  from  streamlining  government  programmes  and 
efficiencies.  Should  these  savings  or  the  expected  numbers  reductions  not  materialise,  we 
reserve the option to take further measures. 

23.       An  income  tax-led  revenue  package—sized  at  over  €2 billion  in   a  full  year—will 
supplement the above expenditure measures in 2011. Over the past decade, the proportion of 
citizens  exempt  from  income  tax  has  risen  to  45 percent  and  tax  credits  have  doubled, 
resulting  in  a  comparatively  low  burden  of  tax  on  ordinary  incomes.  This  is  no  longer 
sustainable. Accordingly, we are widening the tax base, by lowering income tax bands and 
credits by 10 percent, and by reducing various pension-related tax reliefs. We are also taking 
action on other tax expenditures, and distortions arising from the existence of multiple levies.  

24.       To  secure  our  fiscal  targets,  a  number  of  fiscal  measures  have  been  identified 
for 2012–14.  We  will  continue  to  rely  on  expenditure  savings  (€6.1 billion),  led  by  current 
spending (€4.9 billion), as outlined in the Nation al Recovery Plan. We are targeting further 
reductions  in  public  sector  numbers,  social  benefits  and  programme  spending,  and  have 
anchored  the  prospective  savings  by  publishing  multi-year  expenditure  ceilings  by  Vote 
Group  through 2014.  We  are  also  planning  to  move  towards  full  cost-recovery  in  the 
provision  of  water  services  and  ensuring  a  greater  student  contribution  towards  tertiary 
education,  while  ensuring that lower-income groups  remain  supported. In  addition,  we will 
accelerate  the  process  of  placing  the  pension  systems  on  a  path  consistent  with  long-term 
sustainability  of  public  finances.  On  the  tax  side,  we  will  build  on  the  base-broadening 
measures outlined above and establish a sound basis for sub-national finances through a new 
residential-property  based  site  value  tax.  The  Finance  Bill  2012  will  contain  necessary 
provisions to bring into effect the already signalled VAT increases in 2013 and 2014. 

25.       We  are  preparing  institutional  reform  of  the  budget  system  taking  into  account 
anticipated reforms of economic governance at the EU level. A reformed Budget Formation 
Process  will  be  put  in  place.  Furthermore,  we  will  introduce  a  Fiscal  Responsibility  Law 
which will include provision for a medium-term expenditure framework with binding multi-
annual  ceilings  on  expenditure  in  each  area  by  end-July  2011  (structural  benchmark).  A 
Budget  Advisory  Council,  to  provide  an  independent  assessment  of  the  Government’s 
budgetary  position  and  forecasts  will  also  be  introduced  by  end-June  2011  (structural 
benchmark).  These  important  reforms  will  enhance  fiscal  credibility  and  anchor  long-term 
debt sustainability. 

Raising the Growth Potential 

26.       We recognise the need to restore strong sustainable growth. The structural changes to 
the financial and fiscal sectors, described above, are critical for improving the prospects of 
economic  recovery  and  raise  the  medium-term  growth  potential.  Although,  as  is  widely 
recognised,  Ireland  is  a  global  leader  in  providing  a  business-friendly  environment,  the 
National  Recovery  Plan  includes  a  strategy  to  remove  remaining  structural  impediments  to 

 
 
11 

competitiveness  and  employment  creation.  It  also  details  appropriate  sectoral  policies  to 
encourage exports and a recovery of domestic demand, which will also support growth and 
promote jobs. 

27.       Specifically, we will continue to press ahead with other structural reform as set out in 
the Memorandum of Understanding on specific economic policy conditionality: 

• 

• 

• 

We will promote service sector growth through vigorous action to remove remaining 
restrictions on trade and competition, and will propose amendments to legislation to 
enable  the  imposition  of  financial  and  other  sanctions  in  civil  law  cases  relating  to 
competition.  

Building on the forthcoming report of the Review Group on State Assets & Liabilities 
the  government  will  undertake  an  independent  assessment  of  the  electricity  and  gas 
sectors with a view to enhancing their efficiency. State authorities will consult with 
the  Commission  Services  on  the  results  of  this  assessment  with  a  view  to  setting 
appropriate targets for the possible privatisation of state-owned assets.  

To  reduce  long-term  unemployment  and  to  facilitate  re-adjustment  in  the  labour 
market,  we  will  reform  the  benefits  system  and  legislate  to  reform  the  national 
minimum wage. Specifically, changes will be introduced to create greater incentives 
to take up employment.  

Programme Financing 

28.       Ireland is facing large and medium-term balance of payments needs that arise from (i) 
substantial pressures on the capital account that need to be relieved, and (ii) the need to build 
up  reserves  to  improve  banks’  ability  to  meet  their  large  external  debt  rollover  needs.  The 
programme’s success is dependent on substantive external financial assistance. This external 
financing  will  serve  as  a  bridge  during  the  implementation  of  the  critical  reforms  to 
fundamentally restructure the banking system and restore fiscal sustainability. It is our view 
that,  given  Ireland’s  medium-term  structural  adjustment  needs,  an  arrangement  under  the 
Extended Fund Facility (EFF) would be appropriate. Such an arrangement would also have 
the added benefit of a more realistic repayment schedule for Ireland. 

29.       Notwithstanding the large fiscal adjustment, we estimate the financing need to be up 
to  €85 billion  until  the  end  of 2013.  This  includes  a  contingency  element  for  bank 
recapitalisation. An amount of €17.5 billion will  be covered by an Irish contribution through 
the Treasury cash buffer and investments of the National Pension Reserve Fund. We expect 
commitments from the IMF under the Extended Arrangement to amount to €22.5 billion and 
EU financial support from the European Financial Stability Mechanism/European Financial 
Stability  Facility  and  bilateral  arrangements  to  amount  to  € 45 billion.  Ireland  will  draw  on 
these  resources  in  parallel  throughout  the  programme  period.  While  the  envelope  of 
resources  to  be  provided  to  Ireland  is  a  source  of  reassurance  to  the  authorities  and  to 

 
 
12 

financial  markets,  we  plan  to  draw  pari  passu  on  IMF  and  EU  financial  support  on  an  as 
needed  basis.  Moreover,  if  market  access  is  restored  on  a  sustainable  basis,  we  would 
anticipate paying down the drawings made on an advanced schedule.  

30.       We  are  confident  that  the  implementation  of  the  fiscal  and  banking  sector  reforms 
will help the economy recover. 

Programme Monitoring 

31.       Progress  in  the  implementation  of  the  policies  under  the  programme  will  be 
monitored  through  quarterly  and  continuous  performance  criteria,  indicative  targets, 
structural benchmarks, and quarterly programme reviews and compliance with requirements 
under  the  Excessive  Deficit  Procedure  (EDP).  The  attached  Technical  Memorandum  of 
Understanding  (TMU)  defines  the  quantitative  performance  criteria  and  indicative  targets 
under  the  programme.  The  Government’s  targets  for  the  exchequer  balance  (central 
government  cash balance)  excluding interest payments  will  be  monitored  through  quarterly 
performance criteria and net central government debt will be an indicative target (Table 1). 
As is standard in IMF arrangements, there will be a continuous performance criterion on the 
non-accumulation of external payment arrears. Progress on implementing structural reforms 
will be monitored through structural benchmarks (Table 2). A joint EC-ECB Memorandum 
of Understanding specifies, notably, the structural policies recommended in the MEFP, and 
sets a precise time frame for their implementation, 

32.       As is standard in all Fund arrangements, a safeguards assessment of the Central Bank 
of Ireland will be completed by the first review of the arrangement. In this regard, the Central 
Bank will receive a safeguards mission from the Fund and provide the information required 
to complete the assessment by the first review. As a related matter, and given that financing 
from the IMF will be used to provide direct budget support, a framework agreement will be 
established  between  the  government  and  the  Central  Bank  of  Ireland  on  their  respective 
responsibilities for servicing financial obligations to the IMF. As part of these arrangements, 
Fund disbursements will be deposited into the government’s account at the Central Bank. 

33.       We authorise the IMF and the European Commission to publish the Letter of Intent 
and its attachments, and the related staff report. 

 
 
Table 1. Ireland: Quantitative Performance Criteria and Indicative Targets under the Economic Programme for 2010–11 

December 31, 2010 

March 31, 2011 

June 30, 2011 

September 30, 2011  December 31, 2011

 (In billions of Euros) 

Performance 
Criterion 

Performance 
Criterion 

Indicative 
Target 

Indicative Target 

Indicative Target 

-15.3 

0 

-7.8 

0 

-11 

0 

-14.3 

-14.6 

0 

0 

1. Cumulative exchequer primary 
balance 1/ 

2. Ceiling on the accumulation of 
new external payments arrears on 
external debt contracted or 
guaranteed by the central 
government 2/ 

Indicative Target 

Indicative Target 

Indicative 
Target 

Indicative Target 

Indicative Target 

3. Ceiling on the stock of central 
government net debt 

83.1 

91.6 

96.5 

100 

102.2 

1/ Measured by the exchequer balance excluding interest payments. Cumulative from the start of the relevant calendar year. 
2/ Applies on a continuous basis. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 2. Prior Action and Structural Benchmarks Under the Economic Programme 
for 2010–11 

Measure 

Submit the 2011 Budget to Dáil Éireann 
(MEFP, ¶22). 

7 December 2010 

Prior Action 

Define the criteria to run stringent 
stress tests scenarios (MEFP ¶12). 

End-December 2010 

Structural Benchmark 

Agree on terms of reference for the due 
diligence of bank assets by 
internationally recognised consulting 
firms (MEFP, ¶12).  

The Central Bank will direct the 
recapitalisation of the principal banks 
(AIB, BOI and EBS) to achieve a capital 
ratio of 12 percent core tier 1 (MEFP, 
¶12). 

Submit to Dáil Éireann the draft 
legislation on a special resolution 
regime (MEFP, ¶14).  

The Central Bank to complete the 
assessment of the banks’ restructuring 
plans (MEFP, ¶11). 

Complete the diagnostic evaluation of 
banks’ assets (MEFP, ¶12).  

Complete stress tests (PCAR 2011) 
(MEFP, ¶12).  

Complete a full assessment of credit 
unions’ loan portfolios (MEFP, ¶18).  

The Central Bank will direct the 
recapitalisation of ILP to achieve a 
capital ratio of 12 percent core tier 1 
(MEFP, ¶12). 

Establish a Budget Advisory Council 
(MEFP, ¶25). 

Introduce a medium-term expenditure 
framework with binding multi-annual 
ceilings on expenditure in each area 
(MEFP, ¶25). 

End-December 2010 

Structural Benchmark 

End-February 2011 

Structural Benchmark 

End-February 2011 

Structural Benchmark 

End-March 2011 

Structural Benchmark 

End-March 2011 

Structural Benchmark 

End-March 2011 

Structural Benchmark 

End-April 2011 

Structural Benchmark 

End-May 2011 

Structural Benchmark 

End-June 2011 

Structural Benchmark 

End-July 2011 

Structural Benchmark 

 
  
  
  
 
 
 
 
 
  
  
  
 
 
 
 
 
 
 
  
  
Fiscal measures included in the programme 

2011 

in million EUR 

Revenue measures 

One-off and other revenue measures 
Current expenditure measures 

Capital expenditure measures 

TOTAL IMPACT in 2011

2012 

in million EUR 

New revenue measures 

Revenue carryover from previous year 
Current and capital expenditure measures 

TOTAL ANNUAL IMPACT

2013 

in million EUR 

New revenue measures 

Revenue carryover from previous year 
Current and capital expenditure measures 

TOTAL ANNUAL IMPACT

1400 

700 
2090 

1800 
5990 

880 

620 
2100 
3600 

850 

250 
2000 
3100

% of GDP 

0.9 

0.4 
1.3 

1.1 
3.8 

% of GDP 

0.5 
0.4 
1.3 
2.2 

% of GDP 

0.5 
0.1 
1.2 
1.8 

15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table. FINANCING NEEDS AND SOURCES - IRELAND, 15/12/2010-2013, bn EUR

29-Nov-10

Dec-2010

2011-Q1

2011

Q2

2011

Q3

2011

2010/11

Q4

Year

2012

Year

2013

Year

2010-2013

Total

A. Gross financing needs public sector

16.1

10.3

Exchequer cash deficit, incl. promissory notes 1/

Long-term debt securities, maturing 

Short-term debt, maturing 

Treasury Bill

Commercial paper 

Retail debt 2/

B. Debt issuance/ Roll-over

Exchequer cash deficit, financing

Long-term debt securities , issuance

Short-term debt, issuance

Treasury Bill

Commercial paper 

Retail debt

C. Net financing needs public sector (A-B)

Budget deficit and promissory notes

Long-term debt

Short-term debt 

Treasury Bill

Commercial paper 

Retail debt

D. Bank recapitalization

Direct capital injection 3/

Further capital provisions

7.0

0.0

7.0

4.7

2.3

2.1

5.4

0.0

0.0

2.7

1.6

1.2

2.7

10.7

7.0

0.0

4.3

3.2

1.1

8.6

0.0

1.4

1.2

0.1

0.3

1.5

0.0

0.0

0.5

0.4

0.1

0.9

8.8

8.6

0.0

0.8

0.8

0.0

13.8

7.0

6.8

7.5

0.0

7.5

TOTAL - FINANCING NEEDS (C+D)

24.5

16.3

FINANCING and PHASING

Use of Ireland's financial buffers

Treasury cash buffer 

National Pension Reserve Fund (NPRF)

EU-IMF loan disbursement 4/ 5/

EU, disbursement

IMF

6.9

6.9

0.0

17.6

11.7

5.9

3.8

1.9

1.9

12.6

8.4

4.2

TOTAL - FINANCING 

24.5

16.3

4.9

4.5

0.0

0.1

0.0

0.1

0.3

1.0

0.0

0.0

0.1

0.0

0.1

0.9

3.9

4.5

0.0

0.0

0.0

0.0

8.9

3.1

4.4

1.2

0.1

1.1

0.3

2.0

0.0

0.0

1.1

0.0

1.1

0.9

7.0

3.1

4.4

0.1

0.1

0.0

3.7

0.0

3.7

7.6

1.9

0.0

1.9

5.8

3.9

1.9

7.6

0.0

0.0

0.0

7.0

0.0

0.0

0.0

7.0

4.6

2.3

7.0

40.2

23.2

4.4

9.6

6.0

3.6

3.0

9.8

0.0

0.0

4.5

2.0

2.5

5.4

30.4

23.2

4.4

5.1

4.0

1.1

-2.4

25.0

7.0

18.0

29.5

18.7

5.6

3.4

2.0

1.4

1.8

12.3

3.7

1.1

3.7

2.0

1.7

3.8

17.2

15.0

4.5

-0.3

0.0

-0.3

-2.0

5.0

0.0

5.0

55.4

22.2

12.5

8.8

3.7

42.9

28.6

14.3

2.5

0.0

2.5

19.7

13.1

6.6

55.4

22.2

29.2

17.4

6.0

3.7

2.0

1.7

2.1

26.8

14.0

4.8

3.8

2.0

1.8

4.2

2.5

3.5

1.2

-0.2

0.0

-0.2

-2.1

5.0

0.0

5.0

7.5

2.5

0.0

2.5

5.0

3.3

1.6

7.5

98.9

59.4

16.0

16.7

10.0

6.7

6.9

48.9

17.7

5.9

12.0

6.0

6.1

13.3

50.0

41.7

10.0

4.6

4.0

0.6

-6.4

35.0

7.0

28.0

85.0

17.5

8.8

8.7

67.5

45.0

22.5

85.0

-0.6

-0.6

-0.6

-0.6

Notes:

1/ Includes interest payments. Deficit projections are based on more prudent assumptions than those underlying the macroeconomic projections.

2/ Includes retail debt (primarily post office accounts) and maturing debt of Housing Finance Agency (with direct call on exchequer if not funded).

3/ Capital injection in 2010-Q4 to meet 12% Core Tier 1 ratio for AIB, BoI, ILP and EBS. 

4/ EU-IMF share equally split among IMF (1/3), EFSM (1/3) and EFSF/bilaterals (1/3).  

5/ First disbursement will be in Q4 2010

16

 
Ireland 
Memorandum of Understanding  
on 

SPECIFIC ECONOMIC POLICY CONDITIONALITY 
2 December, 2010 

The quarterly disbursement of financial assistance from the European Financial Stabilisation 
Mechanism (EFSM), the European Financial Stability Facility (EFSF) and bilateral loans by 
UK,  Sweden  and  Denmark  will  be  subject  to  quarterly  reviews  of  conditionality  for  the 
duration  of  the  programme.  Release  of  the  instalments  will  be  based  on  observance  of 
quantitative performance criteria, respect for EU Council Decisions and Recommendations in 
the context of the excessive deficit procedure, and a positive evaluation of progress made with 
respect to policy criteria in the Memorandum of Economic and Financial Policies (MEFP) and 
in  this  Memorandum  of  Understanding  on  specific  economic  policy  conditionality  (MoU), 
which specifies the detailed criteria that will be assessed for the successive reviews up to the 
end of 2013. If targets are (expected to be) missed, additional action will be taken.  

The authorities commit to consult with the European Commission, the ECB and the IMF on 
the adoption of policies that are not consistent with this Memorandum. They will also provide 
the  European  Commission,  the  ECB  and  the  IMF  with  all  information  requested  that  is 
available  to  monitor  progress  during  programme  implementation  and  to  track  the  economic 
and financial situation. Prior to the release of the instalments, the authorities shall provide a 
compliance report on the fulfilment of the conditionality. 

The release of the first instalments will be conditional on the successful adoption of Budget 
2011 as described in the MEFP and this MoU. 

1.  Actions for the first review (actions to be completed by end Q1-2011) 

i.  Fiscal consolidation 

Government  submits  the  draft  budget  for  2011  for  Dáil  approval.  The  budget  provides 
information  and  prudent  projections  on  the  entire  general  government  sector  and  targets  a 
further  reduction  of  the  general  government  deficit  in  line  with  the  MEFP.  It  includes  a 
detailed presentation of fiscal consolidation adjustments for 2011 of €6 billion. 

The budget includes the following measures (in exceptional circumstances, measures yielding 
comparable  savings  could  be  considered  in  close  consultation  with  European  Commission, 
IMF and ECB staffs);  

-  Revenue measures to raise at least €1,400m  in 2011 and an extra €620m in a full year will 

be introduced to the Houses of the Oireachtas, including: 

-  A  lowering  of  personal  income  tax  bands  and  credits  or  equivalent  measures  to 

yield €945m in 2011 and an extra €300m in a full year. 

17

 
 
 
 
 
 
 
 
 
 
 
 
 
-  A reduction in pension tax relief and pension related deductions to yield €155m in 

2011, and an extra €105m in a full year. 

-  A  reduction  in  general  tax  expenditures  to  yield  €220m  in  2011,  and  an  extra 

€185m in a full year. 

-  Excise and miscellaneous tax measures to raise €80m in 2011 and a further €30m 

in a full year will be introduced.  

-  The government will outline methods to raise at least €700m in one-off and other 

measures in 2011.  

-  A  reduction  of  current  expenditure  in  2011  of  at  least  €2,090m  will  be  implemented 

including; 

-  Social Protection expenditure reductions.  

-  Reduction of public service employment numbers in 2011.  

-  A  reduction  of  existing  public  service  pensions  on  a  progressive  basis  averaging 

over 4% will be introduced.  

-  Other expenditure savings of €1,030m in cluding savings on goods and services. 

-  A  reduction  of  at  least  €1,800m  in  public  capit al  expenditure  against  existing  plans  for 

2011 will be introduced. 

Government  will  rigorously  implement  the  budget  for  2011  and  the  fiscal  consolidation 
measures  announced  afterwards,  consistent  with  the  requirements  of  the  excessive  deficit 
procedure. Progress is assessed against the (cumulative) quarterly primary deficit ceilings in 
the  Memorandum  of  Economic  and  Financial  Polices  (MEFP)  including  the  Technical 
Memorandum of Understanding (TMU). 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

ii.  Financial sector reforms 

Recapitalisation measures 

-  The measures proposed for the recapitalisation of Irish banks in the government statement 
of 30 September 2010 will be implemented, taking into account any changes in strategy 
for the future of the banking sector agreed under the programme. 

-  Further  deleveraging  of  the  banks  will  be  achieved  by  the  extension  of  the  NAMA 
programme  to  include  approximately  €16bn  of   land  and  development  loans  in  AIB  and 
Bank  of  Ireland,  which  had  previously  been  excluded  as  they  were  below  a  value 

18

 
 
 
 
 
 
 
 
 
 
threshold of €20m. NAMA will categorise s ub-€20m AIB and BOI land and development 
and associated loans (roughly estimated to number 10,000) by reference to asset type and 
region.  NAMA  will  then  apply  different  discounts  to  each  category  based  on  NAMA’s 
loan valuation experience up to the point of valuation. On this basis it is expected that all 
loans  will  be  transferred  by  end-March  2011.  NAMA  will  issue  bonds  in  return  for  the 
assets transferred. NAMA would build on the existing outsourcing arrangements with the 
banks for the management of these smaller loans and performance will be incentivised as 
appropriate.  The  NAMA  legislation  will  be  amended  to  underpin  the  valuation  and 
acquisition of these assets on a portfolio basis. The additional capital requirement will be 
met  by  the  programme  and  is  included  in  the  figure  below.  These  measures  will  be 
notified to the European Commission in accordance with EU competition rules.  

-  Prudential Capital Assessment Review (PCAR) minimum capital requirement for the Irish 

banks (AIB, BOI, EBS and ILP) will be set at 10.5% core tier 1; 

- 

In  addition  the  Irish  authorities  will  ensure  that  AIB,  BOI  and  EBS  are  initially 
recapitalised to a level of 12% core tier 1 capital, which will take account of haircuts on 
the  additional  loans  to  be  transferred  to  NAMA  and  will  fund  early  deleveraging  by 
making available EUR 10 billion in the system; the recapitalisation will take the form of 
equity shares (or equivalent instruments for EBS); 

-  The  PCAR  exercise  will  be  enhanced  to  provide  a  comprehensive  evaluation  of  the 

underlying assets of the banks, taking into account future expected losses.  

-  The PCAR for 2011 will be completed based on comprehensive Terms of Reference for 
its  design  and  implementation,  which  will  have  been  previously  agreed  between  the 
Central Bank, the European Commission, IMF and ECB staff. The methodology used will 
be published in detail. The Commission, IMF and ECB shall be involved in the validation 
of  the  PCAR  process.  In  particular,  key  data  and  information  that  relates  to  the  PCAR 
exercise will be available to the Commission, IMF and ECB upon request. 

Deleveraging measures 

-  The Central Bank will complete a Prudential Liquidity Assessment Plan (PLAR) for 2011, 
outlining  measures  to  be  implemented  with  a  view  to  steadily  deleveraging  the  banking 
system  and  reducing  the  banks'  reliance  on  short  term  funding  by  the  end  of  the 
programme period. Ambitious target  loan to deposit  ratios, to  be achieved by  end  2013, 
will be established for each bank by the Irish authorities in consultation with the ECB, EC 
and the IMF by end Dec 2010. These targets will be designed to ensure that convergence 
to Basel III standards can be readily met by the relevant dates. To this end, the PLAR will 
establish target funding ratios for 2013 for each of the banks, identify non core assets and 
set an adjustment path to these targets based on specified non public annual benchmarks. 
Banks  will  be  informed  of  necessary  actions  to  be  taken  so  as  to  comply  with  the 
respective  funding  targets  and  adjustment  paths.  The  design  and  implementation  of  the 
PLAR will be agreed with the European Commission, the ECB and the IMF. Compliance 
with  the  PLAR  benchmarks  will  be  monitored  and  enforced  by  the  Central  Bank  taking 
account of prevailing market conditions. The PLAR will be updated on an annual basis.  

19

 
 
 
 
 
 
 
Reorganisation of banking sector  

-  The  strategy  for  the  future  structure,  functioning  and  viability  of  Irish  credit  institutions 
will be developed in detail and agreed with the European Commission, the ECB and the 
IMF.  Within  the  context  of  a  comprehensive  reorganisation  and  downsizing  of  the 
banking  sector  the  strategy  will  identify  the  appropriate  path  to  ensure  that  the  banking 
system  will  operate  without  the  need  of  further  State  support.  The  Irish  authorities  are 
committed  to  divest  the  participations  in  the  banks  acquired  during  the  crisis  within  the 
shortest timeframe possible which is compatible with financial stability and public finance 
considerations.  Building  on  restructuring  undertaken  to  date,  further  restructuring  and 
viability  plans  for  the  institutions  concerned  will  be  submitted  in  accordance  with  EU 
competition  rules;  these  plans  will  also  be  made  available  to  the  IMF  and  ECB. 
Commitments  undertaken  by  the  Irish  authorities  in  the  context  of  EU  competition 
decisions will be maintained.  

- 

In the context of the above strategy, a specific plan for the resolution of Anglo Irish Bank 
and Irish Nationwide Building Society will be established and submitted to the European 
Commission in accordance with EU competition rules. Any related legal procedures will 
be set in motion under a precise timetable. This plan will seek to minimise capital losses 
arising from the working out of these non-viable credit institutions. The Government will 
ensure that these credit institutions adhere to the requisite capital ratios. 

-  Legislation on improved procedures for early intervention in distressed banks and special 
bank resolution regime (SRR) will be introduced. The SRR should include a robust set of 
powers and tools to ensure the competent authorities can promptly and effectively resolve 
distressed  banks  e.g.  when  they  pose  a  risk  to  financial  stability.  The  legislation  will  be 
consistent with the EU Treaty rules and will be consistent with similar initiatives ongoing 
at EU level. 

-  Central Bank staffing in relation to the PCAR and PLAR exercises will be reviewed and 
augmented as necessary to guarantee that both exercises can be conducted on a timely and 
efficient basis. 

Burden sharing by holders of subordinated debt   

-  Consistent  with  EU  State  aid  rules,  burden  sharing  will  be  achieved  with  holders  of 
subordinated  debt  in  relevant  credit  institutions  over  the  period  of  the  programme.  This 
will be based on the quantum of capital and other financial assistance the State commits to 
support  specific  credit  institutions  and  the  financial  viability  of  those  institutions  in  the 
absence of such  support. Resolution and restructuring legislation which will address the 
issue of burden sharing by subordinated bondholders will be submitted to the Oireachtas 
by  end-2010.  Where  it  is  appropriate  in  line  with  the  above  criteria,  the  process  of 
implementing  liability  management  exercises  similar  to  that  which  is  currently  being 
undertaken  in  relation  to  holders  of  subordinated  debt  in  Anglo  Irish  Bank  will  be 
commenced by end-Q1 2011. 

20

 
 
 
 
 
 
 
iii. Structural reforms 

To facilitate adjustment in the labour market 

The government will introduce legislation to reform the minimum wage in such a way as to 
foster  job  creation  notably  for  categories  at  higher  risk  of  unemployment  and  prevent 
distortions  of  wage  conditions  across  sectors  associated  with  the  presence  of  sectoral 
minimum wages in addition to the national minimum wage. Measures will be as follows:  

-  Reduce by €1.00 per hour the nominal level of the current national minimum wage. 

-  Enlarge  the  scope  of  the  "inability  to  pay  clause"  permitting  firms  to  invoke  this  clause 

more than once; 

These measures should come into effect by May 2011. 

An  independent  review  of  the  Framework  REA  and  ERO  arrangements  will  be  initiated  by 
the end of Q1 2011. Terms of Reference and follow up actions will be agreed with European 
Commission Services. 

To reduce the risk of long-term unemployment 

The  government  will  reform  the  unemployment  benefit  system  in  such  a  way  as  to  provide 
incentives  for  an  early  exit  from  unemployment.  This  reform  of  unemployment  and  social 
assistance  benefits  will  be  part  of  overall  reforms  in  the  welfare  system  designed  to  reach 
budgetary savings of €750m in 2011. 

Legislative measures will be introduced  with a view to: 

Taking  steps  to  tackle  unemployment  and  poverty  traps  including  through  reducing 
replacement rates for individuals receiving more than one type of benefit (including housing 
allowance). 

The government reforming the system of activation policies in such a way as to adapt it to the 
reform  in  benefits  and  make  it  more  effective.  Legislative  and  other  measures  will  be 
introduced with a view to: 

- 

improving the efficiency of the administration of unemployment benefits, social assistance 
and active labour market policies, by exploiting synergies and reducing the overlapping of 
competencies across different departments; 

-  enhancing conditionality on work and training availability;  

- 

strengthening activation measures via:  

i. 

ii. 

the introduction of instruments to better identify of job seekers' needs ("profiling") 
and increased engagement;  

a  more  effective  monitoring  of  jobseekers'  activities  with  regular  evidence-based 
reports;  

21

 
 
 
 
 
 
 
iii. 

the application of sanction mechanisms for beneficiaries not complying with job-
search  conditionality  and  recommendations  for  participation  in  labour  market 
programmes  set  in  such  a  way  as  to  imply  an  effective  loss  of  income  without 
being  perceived  as  excessively  penalising  so  that  it  could  credibly  be  used 
whenever lack of compliance is ascertained.  

At each subsequent review of the programme, the government will submit reports containing 
an  assessment  (including  by  means  of  quantitative  indicators)  of  the  management  of 
activation  policies  and  on  the  outcome  of  job  seekers'  search  activities  and  participation  in 
labour market programmes. 

Legislative measures should come into effect by May 2011. 

An  in-depth  review  of  the  personal  debt  regime  will  be  published  shortly.  Work  will 
commence  on  reform  of  legislation  which  will  balance  the  interests  of  both  creditors  and 
debtors. 

2.  Actions for the second review (actions to be completed by end Q2-2011) 
i.  Fiscal consolidation 

Government  will  rigorously  implement  the  budget  for  2011  and  the  fiscal  consolidation 
measures  announced  afterwards,  consistent  with  the  requirements  of  the  excessive  deficit 
procedure.  Progress  will  be  assessed  against  the  (cumulative)  quarterly  primary  deficit 
ceilings  in  the  Memorandum  of  Economic  and  Financial  Polices  (MEFP)  including  the 
Technical Memorandum of Understanding (TMU). 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

The  government  will  submit  a  timetable  for  implementing  the  recommendations  of  the 
Memorandum.  Upon  consideration  by  the  European  Commission,  IMF  and  ECB  staffs  the 
measures in this timetable shall become the performance benchmarks for future reviews. 

ii.  Financial sector reforms 

-  The  results  of  the  PCAR  for  2011  will  be  assessed  by  the  authorities,  together  with  the 
European Commission, the ECB and the IMF. The results will be published in detail and 
on a bank-by-bank basis. 

-  Depending on the results of the PCAR 2011, the Government will ensure that the banks 
are recapitalised in the form of equity, if needed, so as to ensure that the minimum capital 
requirement of 10.5% will be maintained. 

22

 
 
 
 
 
 
 
 
 
 
 
- 

Introduce  legislation  for  the  enhancement  of  financial  regulation,  expanding  the 
supervisory and enforcement powers of the Central Bank.  

-  The  Irish  authorities  will  ensure  that  ILP  is  recapitalised  to  a  level  of  12%  core  tier  1 

capital. 

-  Progress in implementation of the strategy for the reorganisation of Irish credit institutions 
will be assessed by the authorities, together with the European Commission, the ECB and 
the IMF. 

iii. Structural reforms 

To enhance long-term fiscal sustainability 

-  The Authorities undertake to introduce legislation to increase the state pension age. Under 
the Government’s National Pension Framework the age at which people will qualify for 
the State Pension will be increased to 66 years in 2014, 67 in 2021 and 68 in 2028. 

iv. Structural fiscal reforms 

To reinforce a credible budgetary strategy 

-  The  government  will  continue  to  ensure  the  reliability  and  the  regular  availability  of 
budgetary  data  for  both  the  whole  of  the  general  government  sector  and  its  breakdown 
into government layers. Specifically, reporting will comply with the provisions included 
in annex 1 of the MoU. 

-  Under  the  period  of  this  financial  assistance  programme,  any  additional  unplanned 

revenues must be allocated to debt reduction. 

- 

In  accordance  with  the  proposal  set  out  in  the  National  Recovery  Plan  2011-2014,  the 
government  will  establish  a  budgetary  advisory  council  to  provide  an  independent 
assessment of the Government’s budgetary position and forecasts.  

-  Government extends the voluntary 15 day rule relating to prompt payments to the health 

service executive, local authorities and state agencies. 

3.  Actions for the third review (actions to be completed by end Q3-2011) 

i.  Fiscal consolidation 

Government  will  rigorously  implement  the  budget  for  2011  and  the  fiscal  consolidation 
measures  announced  afterwards,  consistent  with  the  requirements  of  the  excessive  deficit 
procedure. Progress is assessed against the (cumulative) quarterly primary deficit ceilings in 
the  Memorandum  of  Economic  and  Financial  Polices  (MEFP)  including  the  Technical 
Memorandum of Understanding (TMU). 

Government will consider an appropriate adjustment, including to the overall public service 
wage  bill,  to  compensate  for  potential  shortfalls  in  the  projected  savings  arising  from 
administrative efficiencies and public service numbers reductions. 

23

 
 
 
 
 
 
 
 
 
 
 
The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

ii.  Financial sector reforms 

- 

Interim  review  of  progress  under  PLAR  2011  and  any  related  actions  will  be  assessed, 
together with the European Commission, the ECB and the IMF.  

-  Progress in implementing the strategy for the reorganisation of Irish credit institutions will 
be assessed by the authorities, together with the European Commission, the ECB and the 
IMF. 

-  Review progress against PCAR requirements. 

iii. Structural reforms 

To increase growth in the domestic services sector 

Government will introduce legislative changes to remove restrictions to trade and competition 
in sheltered sectors including:  

-  

the  legal  profession,  establishing  an  independent  regulator  for  the  profession  and 
implementing  the  recommendations  of  the  Legal  Costs  Working  Group  and  outstanding 
Competition Authority recommendations to reduce legal costs. 

-   medical services, eliminating restrictions on the number of GPs qualifying and removing 
restrictions on GPs wishing to treat public patients as well as restrictions on advertising. 

-  

the pharmacy profession, ensuring that the recent elimination of the 50% mark-up paid for 
medicines under the State's Drugs Payments Scheme is enforced. 

To enhance competition in open markets 

-  Government  should  introduce  reforms  to  legislation  to  (1)  empower  judges  to  impose 
fines  and  other  sanctions  in  competition  cases  in  order  to  generate  more  credible 
deterrence and (2) require the competition authorities to list restrictions in competition law 
which  exclude  certain  sectors  from  its  scope  and  to  identify  processes  to  address  those 
exclusions. 

To encourage growth in the retail sector 

-  The government will conduct a study on the economic impact of eliminating the cap on 
the size of retail premises with a view to enhancing competition and lowering prices for 
consumers  and  discuss  implementation  of  its  policy  implications  with  the  Commission 
services.  

iv. Structural fiscal reforms 

To put the public service pension system on a more sustainable basis 

-  Pension  entitlements  for  new  entrants  to  the  public  service  will  be  reformed  with  effect 
from 2011. This will include a review of accelerated retirement for certain categories of 
public servants and an indexation of pensions to consumer prices. Pensions will be based 

24

 
 
 
 
 
on career average earnings. New public service entrants will also see a 10% pay reduction. 
New entrants' retirement age will also be linked to the state pension retirement age. 

To ensure a more credible fiscal framework 

-  Assessment of work in progress related to the fiscal governance requirements considered 

in the previous quarters. 

To facilitate better government at a local level 

-  Government will ensure that effective measures are in place to cap the contribution of the 
local  government  sector  to  general  government  borrowing  at  an  acceptable  level.  The 
mechanisms  in  place  to  underpin  this  position  will  be  kept  under  close  review,  in 
consultation with the Commission services. The review will also consider how to provide 
data  on  the  financial  position  including  assets  and  liabilities  of  the  sector  on  a  timelier 
basis.  

4.  Actions for the fourth review (actions to be completed by end Q4-2011) 
i.  Fiscal consolidation 

Government  will  rigorously  implement  the  budget  for  2011  and  the  fiscal  consolidation 
measures  announced  afterwards,  consistent  with  the  requirements  of  the  excessive  deficit 
procedure. Progress is assessed against the (cumulative) quarterly primary deficit ceilings in 
the  Memorandum  of  Economic  and  Financial  Polices  (MEFP)  including  the  Technical 
Memorandum of Understanding (TMU). 

The  government  will  provide  a  draft  budget  for  2012  aiming  to  further  reduce  the  general 
government deficit in line with the National Recovery Plan and the programme and including 
the detailed presentation of consolidation measures amounting to at least €3.6bn.  

-  Revenue measures to yield €1,500m 1 in a full year will be introduced, including: 

-  A lowering of personal income tax bands and credits. 

-  A reduction in private pension tax reliefs. 

-  A reduction in general tax expenditures.  

-  A property tax. 

-  A reform of capital gains tax and acquisitions tax. 

-  An increase in the carbon tax. 

-  The budget will provide for a reduction of expenditure in 2012 of €2,100m including: 

-  Social expenditure reductions.  

-  Reduction of public service numbers. and public service pension adjustments. 

-  Other programme expenditure, and reductions in capital expenditure. 

1 Inclusive of 2011 carryover 

25

 
 
 
 
 
 
 
                                                 
The Authorities will introduce measures to ensure that the deficit reduction targets as set out 
in the National Recovery Plan are achieved. 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

ii.  Financial sector reforms 

-  Progress in implementing of the strategy for the reorganisation of Irish credit institutions 
will be assessed by the authorities, together with the European Commission, the ECB and 
the IMF. 

iii. Structural reforms 

To assist in financing need and to increase competition 

-  Building on the forthcoming report of the Review Group on State Assets & Liabilities the 
government  will  undertake  an  independent  assessment  of  the  electricity  and  gas  sectors. 
State  authorities  will  consult  with  the  Commission  Services  on  the  results  of  this 
assessment with a view to setting appropriate targets. 

In advance of the introduction of water charges 

-  The  government  will  have  undertaken  an  independent  assessment  of  transfer  of 
responsibility  for  water  services  provision  from  local  authorities  to  a  water  utility,  and 
prepare  proposals  for  implementation,  as  appropriate  with  a  view  to  start  charging  in 
2012/2013. 

iv. Structural fiscal reforms 

To reinforce the credibility of the budgetary process 

-  Assessment of work in progress related to the fiscal governance requirements considered 

in the previous quarters.  

-  The Government will introduce a Fiscal Responsibility Law which will include provision 
for  a  medium-term  expenditure  framework  with  binding  multi-annual  ceilings  on 
expenditure  in  each  area  by  Q4  2011.  This  will  take  into  account  any  revised  economic 
governance reforms at EU level and will build on reforms already in place.   

5.  Actions for the fifth review (actions to be completed by end Q1-2012) 

i.  Fiscal consolidation 

Government  will  rigorously  implement  the  budget  for  2012  and  the  fiscal  consolidation 
measures  announced  afterwards,  consistent  with  the  requirements  of  the  excessive  deficit 

26

 
 
 
 
 
 
 
 
 
 
 
 
 
procedure. Progress is assessed against the (cumulative) quarterly primary deficit ceilings in 
the  Memorandum  of  Economic  and  Financial  Polices  (MEFP)  including  the  Technical 
Memorandum of Understanding (TMU). Finance Bill 2012 will contain necessary provisions 
to bring into effect the already signalled VAT increases in 2013 and 2014. 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

ii.  Financial sector reforms 

-  PCAR for 2012 will be completed. The methodology used will be published in detail. The 

Government will ensure that the banks adhere to the requisite capital ratios. 

-  PLAR 2012 will be completed and any related actions will be assessed, together with the 

European Commission, the ECB and the IMF.  

-  Progress in implementing of the strategy for the reorganisation of Irish credit institutions 
will be assessed by the authorities, together with the European Commission, the ECB and 
the IMF 

-  Legislation  to  reform  the  personal  debt  regime  to  be  presented  to  the  Houses  of  the 

Oireachtas. 

iii. Structural reforms 

To boost the integrity of the fiscal framework 

-  Assessment of work in progress related to the fiscal governance requirements considered 

in the previous quarters.  

6.  Actions for the sixth review (actions to be completed by end Q2-2012) 

i.  Fiscal Consolidation 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

27

 
 
 
 
 
 
 
 
 
 
 
ii.  Financial sector reforms 

-  The results of the PCAR for 2012 will be assessed, together with European Commission, 
the ECB and the IMF. The results will then be published in detail and on a bank-by-bank 
basis. 

-  Depending  on  the  results  of  the  PCAR  2012,  the  Government  will  ensure  that  the 

minimum capital requirement of 10.5% will be maintained. 

-  Progress  in  implementation  of  the  strategy  for  the  restructuring  of  the  Irish  credit 
institutions banking system will be assessed by the authorities, together with the European 
Commission, the ECB and the IMF. 

iii. Structural fiscal reforms 

To further enhance the credibility of the fiscal framework 

-  Assessment of work in progress related to the fiscal governance requirements considered 

in the previous quarters.   

7.  Actions  for  the  seventh  review  (actions  to  be  completed  by  end  Q3-

2012) 

i.  Fiscal Consolidation 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

ii.  Financial sector reforms 

- 

Interim  review  of  progress  under  PLAR  2011  and  any  related  actions  will  be  assessed, 
together with the European Commission, the ECB and the IMF.  

-  Progress  in  implementing  of  the  strategy  for  restructuring  of  the  Irish  credit  institutions 
will be assessed by the authorities, together with the European Commission, the ECB and 
the IMF. 

-  Review progress against PCAR requirements. 

8.  Actions for the eighth review (actions to be completed by end Q4-2012) 

i.  Fiscal consolidation 

The  government  will  provide  a  draft  budget  for  2013  aiming  at  a  further  reduction  of  the 
general government deficit in line with the 4-year plan and the programme and including the 
detailed presentation of consolidation measures amounting to at least €3,100m. 

28

 
 
 
 
 
 
 
 
 
 
-  Revenue measures to raise at least €1,100m 2 in the full year will be introduced, including: 

-  A lowering of personal income tax bands and credits.  

-  A reduction in private pension tax relief. 

-  A reduction in general tax expenditures.  

-  An increase in property tax.  

-  The budget will provide for a reduction in expenditure in 2013 of no less than €2,000m, 

including: 

-  Social expenditure reductions.  

-  Reduction of public service numbers and public service pension adjustments.  

-  Other programme expenditure, and reductions in capital expenditure. 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

ii.  Financial sector reforms 

-  Progress in implementation of the strategy for the reorganisation of Irish credit institutions 
will be assessed by the authorities, together with the European Commission, the ECB and 
the IMF. 

- 

Implementing  of  the  plan  for  restructuring  and  strengthening  the  balance  sheets  of  the 
credit union sector will be completed. 

9.  Actions for the ninth review (actions to be completed by end Q1-2013) 

i.  Fiscal consolidation 

Government  will  rigorously  implement  the  budget  for  2013  and  the  fiscal  consolidation 
measures  announced  afterwards,  consistent  with  the  requirements  of  the  excessive  deficit 
procedure. Progress is assessed against the (cumulative) quarterly primary deficit ceilings in 
the  Memorandum  of  Economic  and  Financial  Polices  (MEFP)  including  the  Technical 
Memorandum of Understanding (TMU). 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

2 Inclusive of carryover from 2012 

29

 
 
 
 
 
 
 
 
                                                 
ii.  Financial sector reforms 

-  PCAR for 2013 will be completed. The methodology used will be published in detail. 

-  PLAR 2012 will be completed and any related actions will be assessed, together with the 

European Commission, the ECB and the IMF.  

-  Progress in implementing of the strategy for the reorganisation of Irish credit institutions 
will be assessed by the authorities, together with the European Commission, the ECB and 
the IMF. 

iii. Structural fiscal reforms 

-  Assessment  of  work  in  progress  related  to  the  fiscal  reforms  considered  in  the  previous 

quarters. 

-  The nominal value of the State pension should not rise over the period of the programme.  

10.  Actions for the tenth review (actions to be completed by end Q2-2013) 

i.  Fiscal Consolidation 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

ii.  Financial sector reforms 

-  The results of the PCAR for 2013 will be assessed,  together the European Commission, 
the ECB and the IMF. The results will then be published in detail and on a bank-by-bank 
basis. 

-  Depending  on  the  results  of  the  PCAR  2013,  the  Government  will  ensure  that  the 

minimum capital requirement of 10.5% will be maintained. 

-  The PLAR for 2013 will be completed.  

-  Progress in implementation of the strategy for the restructuring the banking system will be 
assessed  by  the  authorities,  together  with  the  European  Commission,  the  ECB  and  the 
IMF. 

11.  Actions  for  the  eleventh  review  (actions  to  be  completed  by  end  Q3-

2013) 

i.  Fiscal Consolidation 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

30

 
 
 
 
 
 
 
 
ii.  Financial sector reforms 

- 

Interim review of progress under PLAR 2011 and any related actions will be assessed, 
together with the European Commission, the ECB and the IMF.  

-  Progress in implementing of the strategy for the reorganisation of Irish credit institutions 
will be assessed by the authorities, together with the European Commission, the ECB and 
the IMF. 

-  Review progress against PCAR requirements 

12.  Actions  for  the  twelfth  review  (actions  to  be  completed  by  end  Q4-

2013) 

i.  Fiscal Consolidation 

The  Department  of  Finance  will  continue  to  ensure  tight  supervision  of  expenditure 
commitments  by  the  line  departments,  and  effective  tax  collection,  to  make  certain  that  the 
primary  deficit  target  in  cash  (see  Table  1  of  MEFP)  and  the  general  government  nominal 
budget  deficit  on  ESA95  basis  as  set  out  in  the  EU  Council  Recommendation  on  excessive 
deficit procedures are achieved. 

ii.  Financial sector reforms 

-  Progress in implementing of the strategy for the reorganisation of Irish credit institutions 
will be assessed by the authorities, together with the European Commission, the ECB and 
the IMF. 

31

 
 
 
 
Annex 1. Provision of data  

During  the  programme,  the  following  indicators  and  reports  shall  be  made  available  to  the 
European Commission, the ECB and the IMF staffs by the authorities on a regular basis.  

To be provided by the Department of Finance 

Monthly  data  on  adherence  to  budget  targets  (Exchequer  statement, 
details  on  Exchequer  revenues  and  expenditure  with  information  on 
Social Insurance Fund to follow as soon as practicable). 

Monthly,  10  days  after  the  end 
of each month 

Updated monthly report on the central government's budget execution 
and prospects for the remainder of the year. 

Monthly,  30  days  after  the  end 
of each month 

Quarterly  data  on  main  revenue  and  expenditure  items  of  local 
government. 

Quarterly,  90  days  after  the  end 
of each quarter 

Updated  annual  plans  for  the  general  government  balance  showing 
transition  from  the  Exchequer  balance  to  the  general  government 
balance  (using  presentation  in  Table  1  and  Table  2A  of  the  EDP 
notification). 

Monthly,  30  days  after  the  end 
of each month  

Quarterly  data  on  the  public  service  wage  bill,  number  of  employees 
and average wage (using the presentation of the Pay and Pension Bill 
with further details on pay and pension costs of local authorities).  

Quarterly,  30  days  after  the  end 
of each quarter 

Information on the main Government spending and receipt items 

Weekly  on  Friday,  reporting  on 
the previous Thursday 

Quarterly  data  on  general  government  accounts,  and  general 
government debt as per the relevant EU regulations on statistics. 

Quarterly  accrual  data,  90  days 
after the end of each quarter  

Updated  annual  plans  of  the  general  government  balance  and  its 
breakdown  into  revenue  and  expenditure  components  for  the  current 
year  and  the  following  four  years,  using  presentation  in  the  stability 
programme's  standard 
table  on  general  government  budgetary 
prospects.  

To be provided by the NTMA 

Together with EDP notification 

Weekly information on the Government's cash position with indication 
of sources as well of number of days covered  

Weekly  on  Friday,  reporting  on 
the previous Thursday 

Data on below-the-line financing for the general government. 

Data  on  public  debt,  new  guarantees  and  other  instruments  issued  by 
the  general  government  to  public  enterprises,  banks  and  the  private 
sector. 

Data  on  short-,  medium-  and  long-term  debt  falling  due  (all 
instruments)  over  the  next  36  months  for  the  general  government 
(interest  and  amortisation)  and  for  central  government  and  local 
authorities 

Monthly,  no  later  than  15  days 
after the end of each month 

Monthly,  30  days  after  the  end 
of each month 

Monthly,  30  days  after  the  end 
of each month 

Data  on  short-,  medium-  and  long-term  debt  falling  due  (all 
instruments) over the next 36 months for State-guaranteed enterprises 
(interest and amortisation) (or Dept of Finance) 

Quarterly,  30  days  after  the  end 
of each quarter 

Updated  estimates  of  financial  sources  (bonds 
issuance,  other 
financing sources) for the banking and government sectors in the next 
12 months  

Monthly,  30  days  after  the  end 
of each month 

 
 
 
To be provided by the Central Bank 

Assets and liabilities of the Central Bank 

Weekly, next working day 

Assets and liabilities of the Irish banking system - aggregate monetary 
balance sheet of credit institutions  

Monthly,  30  days  after  the  end 
of each month 

Short-, medium- and long-term debt falling due (by type of instrument) 
over  the  next  36  months  for  domestic  banks  of  systemic  importance 
(interest and amortisation). 

Monthly,  30  days  after  the  end 
of each month 

Weekly individual operational balance sheets of commercial banks (of 
systemic  importance),  including  detailed  information  on  deposits  (by 
maturity  and  type  of  depositor)  and  loans  provided  to  the  public  and 
the private sector (households and corporates) 

Weekly, next working day 

Public  debt  and  new  guarantees  issued  by  the  general  government  to 
banks. 

Monthly,  30  days  after  the  end 
of each month 

Financial  stability  indicators  (IMF  core  set:  deposits,  non-performing 
loans, capital adequacy ratios)) for systemic domestic banks 

Monthly,  30  days  after  the  end 
of each month 

Estimates of domestic banks' capital needs in the next 12 months 

Monthly,  30  days  after  the  end 
of each month 

Estimates  of  funding  sources  for  the  banking  sector  for  the  next  12 
months 

Monthly,  30  days  after  the  end 
of each month 

33

 
TECHNICAL MEMORANDUM OF UNDERSTANDING (TMU) 

December 1, 2010 

1.       This Technical Memorandum of Understanding (TMU) sets out the understandings 
regarding the definitions of the indicators subject to performance criteria and indicative 
targets under the arrangement supported by the Extended Fund Facility (EFF). These 
performance criteria and indicative targets are reported in Table [1] attached to the 
Memorandum of Economic and Financial Policies (MEFP). This TMU also describes the 
methods to be used in assessing the programme performance and the information 
requirements to ensure adequate monitoring of the targets. 

2.       For programme purposes, all foreign currency-related assets, liabilities, and flows will 
be evaluated at “programme exchange rates”, with the exception of the items affecting the 
government fiscal balances, which will be measured at current exchange rates. The 
programme exchange rates are those that prevailed on [November 24], as shown on the 
European Central bank web-page, in particular, €1 = [1.3339] U.S. dollar and €1 = [0.86547] 
SDR. 

I.   QUANTITATIVE PERFORMANCE CRITERIA AND INDICATIVE TARGETS 

A.   Floor on the Exchequer Primary Balance 

3.       The exchequer balance is the traditional domestic budgetary aggregate which 
measures the net surplus or net deficit position of the Exchequer Account. The Exchequer 
Account is the single bank account of the Central Fund and is held at the Central Bank of 
Ireland. The annual audited accounts of the Exchequer Account produced by the Department 
of Finance are known as the Finance Accounts. An unaudited summary known as the 
Exchequer Statement is produced at the end of each month. Under the Irish Constitution, all 
Government receipts are paid in to the Central Fund and all Government expenditure is 
funded from it, unless provided otherwise by law3. The Exchequer balance is the difference 
between total receipts into, and total expenditure out of, the Exchequer Account. It measures 
the sum of the current and capital balances. The current balance is defined as current receipts 
(tax and non-tax revenue) minus current expenditure (voted expenditure and non-voted 
expenditure charged directly on the Central Fund, including the Sinking Fund). The capital 
balance is defined as capital receipts (Sinking Fund and other capital receipts) minus capital 
expenditure (voted and non-voted expenditure). The Sinking Fund provision is a transfer from 
the current account to the capital account to reduce national debt and has no effect on the 
overall exchequer balance.  

3 Receipts of the Central Fund comprise Exchequer tax revenues, non-tax revenues, receipts from the European 
Union and other capital receipts. Charges on the Central Fund include the expenditure of Government 
departments and offices, payments related to the servicing of the national debt, payments to the European Union 
Budget, the salaries, pensions and allowances of the President, judiciary, and Comptroller & Auditor General 
and the running costs of the Houses of the Oireachtas (Parliament). Extra-budgetary funds (including the 
National Pensions Reserve Fund), the Social Insurance Fund, semi-state bodies and local governments are not 
part of the Exchequer system. 

 
 
 
                                                 
 
4.       The performance criteria are set on the exchequer primary balance (the exchequer 
balance excluding net debt interest payments in the service of the National Debt) 4.  

5.       For the purposes of the programme, the floor on the exchequer primary balance 
(quantitative performance criterion) will be adjusted downward by payments for bank 
restructuring carried out under the programme’s banking sector support and restructuring 
strategy. Such payments may include, inter alia, loans to banks, investments in their equity 
(requited recapitalisation), unrequited recapitalisation, and purchases of troubled assets, which 
are carried out in line with programme objectives. Any other financial operation by 
Government to support banks, including the issuance of guarantees or provision of liquidity, 
will be reported to IMF staff.  

6.       The floor on the exchequer primary balance (quantitative performance criterion) in 
each year will be measured cumulatively from the start of that calendar year. 

Cumulative Exchequer primary balance 

(In billions of Euros) 

From January 1, 2010: 
   End-December 2010 (performance criterion) 
From January 1, 2011: 
   End-March 2011 (performance criterion) 
   End-June 2011 (indicative target) 

   End-September 2011 (indicative target) 

   End-December 2011 (indicative target) 

-15.3 

-7.8 
-11.0 
-14.3 

-14.6 

7.       The performance criterion on the exchequer primary balance (floor) for end-March 
2011 and thereafter, will be adjusted upward (downward) for the full amount of any over-
performance (under-performance) in Exchequer tax revenues, pay-related social insurance 
contributions (PRSI), health levy and national training fund contributions against the current 
projection which is listed below5: 

Cumulative Exchequer tax revenue & other receipts (as 
outlined in 7. above)  

(In billions of Euros) 

End-March 2011 (projection) 

End-June 2011 (projection) 

End-September 2011 (projection) 

End-December 2011 (projection) 

9.7 

19.4 
29.7 

41.9 

8.       Any policy changes, including in tax administration and enforcement, which impact 
the above revenue projection will lead to a reassessment of the adjustor in the context of 
program reviews. 

4 Net debt interest payments are as per the end-month Exchequer Statements.  
5 Exchequer tax receipts are comprised of income tax, value added tax (VAT), corporation tax, excise duties, stamp duties, 
capital gains tax, capital acquisitions tax and customs duties.  

35

 
 
 
 
 
                                                 
B.   Ceiling on the Stock of Central Government Net Debt 

9.       The stock of central government net debt, for the purposes of the programme, is 
defined as the National Debt, less liquid assets of the National Pensions Reserve Fund 
(NPRF). The National Debt is defined as the total outstanding amount of principal borrowed 
by central government and not repaid to date, less liquid assets available for redemption of 
those liabilities at the same date. These liquid assets comprise the Exchequer cash balances 
(including cash in the Capital Services Redemption Account), Exchequer deposits with 
commercial banks and other institutions, investments in investment grade sovereign bills. For 
the purposes of the programme, NPRF liquid assets, include the asset classes listed above, and 
also all marketable securities such as include equities, investment grade government bonds 
and other listed investments. NPRF shares in domestic Irish banks are excluded from the 
definition of liquid assets. 

10.       For the purposes of the programme, the ceiling on the central government net debt 
(indicative target) will be adjusted upward by debt arising from payments for bank 
restructuring carried out under the programme’s banking sector support and restructuring 
strategy. These payments may include, inter alia, loans to banks, investments in their equity 
(requited recapitalisation); unrequited recapitalisation; and purchases of troubled assets, 
which are carried out in line with programme objectives. The programme exchange rates will 
apply to all non-euro denominated debt.  

11.       The ceiling on the outstanding stock of central government net debt will be adjusted 
upward (downward) by the amount of any final upward (downward) revision to the stock of 
end-October 2010 central government net debt.  

Central government net debt 
Outstanding stock: 

End-October 2010 (provisional)  

End-December 2010 (indicative target)  

End-March 2011 (indicative target) 

End-June 2011 (indicative target) 

End-September 2011 (indicative target) 

End-December 2011 (indicative target) 

(In billions of Euros) 

78.6 

83.1 

91.6 

96.5 

100.0 

102.2 

C.   Non-accumulation of External Payments Arrears by Central Government 

12.       The central government will accumulate no external payment arrears during the 
programme period. For the purposes of this performance criterion, an external payment arrear 
will be defined as a payment by the central government on its contracted or guaranteed 
external debt that has not been made within five business days after falling due. The 
performance criterion will apply on a continuous basis. 

36

 
 
 
13.       The stock of external payments arrears of the central government will be calculated 
based on the schedule of external payments obligations reported by the National Treasury 
Management Agency. This performance criterion does not cover arrears with regard to trade 
credits. 

II.   REPORTING REQUIREMENTS 

14.       Performance criteria under the programme will be monitored using data supplied to 
the IMF. The Irish authorities will transmit promptly any data revisions in a timely manner.  

•  The Department of Finance will report the Exchequer balance to the IMF staff, 

with a lag of no more than seven days after the test date. 

•  The National Treasury Management Agency will provide provisional figures on 
the outstanding stock of net government debt with a lag of no more than seven 
days after the test date. The revised figures will be provided within three months of 
the test date. 

•  The National Treasury Management Agency will provide the final stock of the 

central government system external payments arrears to the IMF staff, with a lag 
of not more than seven days after the arrears arise in accordance with the 
definition of external payments arrears as set forth in paragraph 12 of this 
memorandum.  

37

 
Detailed macroeconomic projections 

Table 1: Use and supply of goods and services (volume)

Annual % change

2008

2009

2010

2011

2012

2013

2014

2015

  1. Private consumption expenditure
  2. Government consumption expenditure
  3. Gross fixed capital formation

  4. Final domestic demand
  5. Change in inventories

  6. Domestic demand
  7. Exports of goods and services 

  7a.  - of which goods
  7b.  - of which services

  8. Final demand
  9. Imports of goods and services 

  9a.  - of which goods
  9b.  - of which services

-1.8
2.8
-14.3

-7.2
-4.1
-31.1

-4.6

-12.4

-1.4
-2.2
-21.1

-5.1

-5.0
-0.8
-0.2
-1.4

-3.0
-2.9
-13.3
6.5

-13.9
-4.1
-5.2
-2.9

-9.2
-9.7
-18.4
-3.3

-4.3
5.7
4.5
7.1

0.9
2.3
0.6
3.4

 10. Gross domestic product at market prices

-3.5

-7.6

-0.2

Contribution to change in GDP

 11. Final domestic demand
 12. Change in inventories + net acq. of valuables
 13. External balance of goods and services 

-4.2
-0.4
1.4

-11.3
-1.4
3.8

-4.4
0.7
3.4

-1.9
-5.7
-8.9

-3.8

-3.4
4.5
5.0
4.0

0.9
0.9
0.7
1.1

0.9

-3.1
0.3
3.7

-1.0
-0.8
1.8

-0.6

-0.7
4.5
4.8
4.2

2.3
2.7
3.0
2.5

1.9

-0.5
-0.1
2.5

0.5
-2.4
4.3

0.4

0.3
4.6
4.6
4.6

2.8
3.3
3.3
3.3

2.5

0.3
0.0
2.2

1.6
-3.7
7.5

1.3

1.4
4.7
4.7
4.7

3.4
3.9
3.9
3.9

3.0

1.0
0.0
1.9

1.6
-2.0
5.1

1.4

1.4
4.9
4.9
4.9

3.5
4.2
4.2
4.2

3.0

1.0
0.0
2.0

Table 2: Use and supply of goods and services (value)

Annual % change

2008

2009

2010

2011

2012

2013

2014

2015

  1. Private consumption expenditure
  2. Government consumption expenditure
  3. Gross fixed capital formation

  4. Final domestic demand
  5. Change in inventories

  6. Domestic demand
  7. Exports of goods and services 

  8. Final demand
  9. Imports of goods and services 
  10. Gross national income at market prices
  11. Gross value added at basic prices

 12. Gross domestic product at market prices

Table 3: Implicit price deflators

1.2
9.1
-20.5

-3.8
-82.6

-4.8
-1.4

-3.3
-1.1
-5.1
-3.9

-5.0

-11.3
-5.9
-38.0

-16.6
-898.7

-18.0
-3.6

-11.1
-10.1
-15.4
-9.3

-11.3

-2.8
-5.0
-25.6

-7.4
-52.5

-6.5
6.2

0.1
2.7
-4.7
-2.4

-2.0

-1.5
-4.8
-10.2

-3.5
-43.5

-3.2
5.1

1.4
1.4
-0.5
1.6

1.4

-0.2
-1.3
2.1

-0.2
15.0

-0.3
6.6

3.7
4.9
1.1
2.9

2.7

2.1
-1.9
7.0

1.9
3.0

1.9
5.6

4.0
4.3
2.4
3.7

3.8

3.5
-3.2
11.8

3.2
-11.0

3.3
5.8

4.8
4.9
4.0
4.5

4.6

3.6
-1.5
10.2

3.6
0.0

3.6
6.0

5.0
5.2
4.4
4.8

4.8

% change in implicit price deflator

2008

2009

2010

2011

2012

2013

2014

2015

  1. Private consumption expenditure
  2. Government consumption expenditure
  3. Gross fixed capital formation

  4. Domestic demand
  5. Exports of goods and services 

  6. Final demand
  7. Imports of goods and services 

  8. Gross domestic product at market prices

       HICP

3.0
6.2
-7.3

0.5
-0.7

0.0
1.9

-1.5

3.1

-4.4
-1.8
-10.0

-4.9
0.6

-2.2
-0.4

-4.0

-1.7

-1.5
-2.9
-5.6

-2.4
0.5

-0.9
0.4

-1.8

-1.5

0.4
1.0
-1.4

0.3
0.5

0.4
0.5

0.4

0.4

0.8
-0.5
0.3

0.4
2.0

1.4
2.1

0.8

0.6

1.6
0.4
2.6

1.5
1.0

1.2
1.0

1.4

1.6

1.8
0.5
4.0

1.9
1.0

1.3
1.0

1.6

1.8

1.9
0.5
4.8

2.1
1.0

1.4
1.1

1.7
1.9   

 
 
Table 4: Labour market and cost

Annual % change

2008

2009

2010

2011

2012

2013

2014

2015

1. Labour productivity
2. Compensation of employees per head
3. Unit labour costs
4. Total population
5. Population of working age (15-64 years)
6. Total employment 
7. Calculated unemployment rate - Eurostat definition (%)

-2.4
3.4
4.5
1.6
1.0
-1.1
6.3

0.6
0.0
-3.5
0.6
-0.1
-8.1
11.8

3.9
-2.1
-5.5
0.1
-0.8
-4.0
13.6

1.7
0.5
-1.5
0.0
-0.9
-0.8
13.4

1.3
0.1
-1.4
0.1
-0.8
0.6
12.7

1.3
1.1
0.0
0.4
-0.3
1.1
11.4

1.4
1.4
0.1
0.5
-0.1
1.5
10.1

1.1
1.5
0.5
0.5
0.1
2.0
8.7

Table 5: External balance

levels

2008

2009

2010

2011

2012

2013

2014

2015

1. Exports of goods (fob)
2. Imports of goods (fob)

3. Trade balance (goods, fob/fob) (1-2)

3a. p.m. (3) as % of GDP

4. Exports of services
5. Imports of services

6. Services balance (4-5)

6a. p.m. 6 as % of GDP

7. External balance of goods & services (3+6)

7a. p.m. 7 as % of GDP

8. Balance of primary incomes and current

8a. - of which, balance of primary income
8b. - of which, net current Transfers

8c. p.m. 8 as % of GDP

9. Current external balance (7+8)

9a. p.m. 9 as % of GDP
10. Net capital transactions

11. Net lending (+)/ net borrowing (-) (9+10)

11a. p.m. 11 as % of GDP

81.0
57.2

23.8
13.2
69.1
76.7

-7.5
-4.2

16.3
9.1
-25.2
-22.7
-2.5
-14.0

-8.9
-5.0
0.0

-8.9
-4.9

77.0
44.7

32.4
20.3
67.8
75.7

-8.0
-5.0

24.4
15.3
-29.2
-27.0
-2.2
-18.3

-4.8
-3.0
-1.3

-6.1
-3.8

81.1
45.3

35.8
22.9
72.7
78.3

-5.7
-3.6

30.1
19.3
-31.5
-29.7
-1.8
-20.1

-1.4
-0.9
0.0

-1.3
-0.9

85.8
45.9

39.9
25.1
75.8
79.4

-3.6
-2.3

36.3
22.9
-34.3
-32.4
-1.9
-21.6

2.0
1.2
0.0

2.0
1.2

91.4
48.1

43.3
26.6
80.9
83.3

-2.4
-1.5

40.9
25.1
-37.2
-35.4
-1.8
-22.9

3.7
2.3
0.0

3.7
2.3

96.4
50.1

46.3
27.4
85.4
86.9

-1.4
-0.9

44.9
26.5
-40.4
-38.6
-1.8
-23.9

4.4
2.6
0.0

4.4
2.6

102.0
52.6

108.1
55.4

49.4
27.9
90.4
91.2

-0.8
-0.4

48.6
27.5
-43.1
-41.3
-1.8
-24.3

5.6
3.1
0.0

5.6
3.1

52.7
28.4
95.8
95.9

-0.1
-0.1

52.6
28.4
-45.7
-43.8
-1.9
-24.7

6.9
3.7
0.1

7.0
3.8  

39

 
Table 6: Fiscal accounts

Indirect taxes
Direct taxes
Social contributions
Sales
Other current revenue

Total current revenue
Capital transfers received

Total revenue

Compensation of employees
Intermediate consumption
Social transfers in kind via market producers
Social transfers other than in kind
Interest paid
Subsidies
Other current expenditure

Total current expenditure
Gross fixed capital formation
Other capital expenditure

Total expenditure

2008

2009

2010

2011

2012

2013

2014

2015

% of GDP

12.4
11.5
7.0
1.7
1.7

34.3
1.2

35.4

11.3
5.5
2.0
12.4
1.4
0.5
2.5

35.7
5.2
1.9

42.7

11.3
10.7
7.2
2.2
1.7

33.2
1.3

34.5

12.3
5.8
2.1
15.3
2.2
0.5
2.7

40.9
4.7
3.2

48.9

11.3
10.3
7.3
2.4
1.8

33.1
2.1

35.2

11.7
5.9
2.1
16.1
3.0
0.8
2.2

41.8
4.5
21.0

67.2

11.1
11.1
7.2
2.4
1.9

33.6
1.3

34.9

11.3
5.2
2.0
15.6
4.1
0.7
2.1

41.0
3.5
1.1

45.6

10.9
11.7
7.1
2.0
1.6

33.3
1.4

34.7

10.8
4.9
1.8
14.8
4.1
0.7
2.1

39.2
3.1
1.0

43.3

11.0
12.0
7.0
1.9
1.6

33.4
1.4

34.8

10.2
4.6
1.5
13.9
5.7
0.7
2.0

38.5
2.8
1.0

42.3

11.1
12.2
6.8
1.9
1.6

33.6
1.4

35.0

9.6
4.0
1.3
13.0
6.2
0.7
1.9

36.7
2.4
0.9

40.0

11.2
12.1
7.0
1.9
1.5

33.7
1.4

35.0

9.1
3.7
1.2
12.4
6.0
0.6
1.8

34.8
2.3
0.9

38.0

General Government balance (EDP)

-7.3

-14.4

-32.0

-10.6

-8.6

-7.5

-5.1

-2.9

Indirect taxes
Direct taxes
Social contributions
Sales
Other current revenue

Total current revenue
Capital transfers received

Total revenue

Compensation of employees
Intermediate consumption
Social transfers in kind via market producers
Social transfers other than in kind
Interest paid
Subsidies
Other current expenditure

Total current expenditure
Gross fixed capital formation
Other capital expenditure

Total expenditure

% change

-11.6
-13.9
2.7
0.3
35.6

-7.7
-29.1

-8.6

7.0
3.8
10.8
13.3
25.1
7.9
3.4

9.2
4.9
69.8

10.4

-19.1
-17.3
-8.8
17.8
-9.6

-14.1
3.1

-13.5

-3.1
-6.4
-5.7
9.1
38.7
-9.4
-5.8

1.8
-18.9
52.2

1.5

-1.9
-5.9
-0.1
3.6
0.5

-2.3
50.2

-0.2

-7.0
-1.3
-2.2
3.2
38.3
38.0
-21.2

-0.1
-7.2
535.0

34.6

-0.8
9.4
-0.5
1.4
4.6

2.9
-33.6

0.7

-2.3
-9.9
-5.3
-1.6
35.5
0.0
-1.0

-0.4
-21.4
-94.8

-31.3

0.9
8.6
0.8
-11.2
-12.4

1.9
6.9

2.1

-2.3
-3.2
-7.7
-2.3
3.8
0.0
0.0

-1.9
-7.3
-3.8

-2.4

5.1
6.3
2.1
-5.5
3.2

4.2
3.1

4.1

-1.6
-3.7
-10.4
-2.9
44.0
0.0
0.0

2.1
-7.8
0.0

1.4

5.5
6.6
2.7
4.6
3.7

5.2
3.8

5.1

-1.5
-7.7
-8.5
-2.0
13.3
0.0
0.0

-0.4
-8.5
0.0

-0.9

5.3
4.0
7.2
4.8
3.8

5.1
4.2

5.1

-0.5
-5.1
-6.6
-0.1
1.9
0.3
0.3

-0.6
0.0
0.0

-0.6

Nominal GDP, EUR bn

180.0

159.6

156.4

158.5

162.8

169.1

176.9

185.5  

40

 
Table 7: Government debt dynamics

2008

2009

2010

2011

2012

2013

2014

2015

EDP deficit (% of GDP)
EDP gross debt (% of GDP)

-7.3
44.3

-14.4
65.5

-32.0
98.9

-10.6
113.5

-8.6
120.0

-7.5
121.8

-5.1
120.3

-2.9
116.7

levels, EUR bn

EDP deficit
Gross debt
Change in gross debt
Nominal GDP
Real GDP

Real GDP growth (% change)
Change in gross debt (% of GDP)
Stock-flow adjustments (% of GDP)

-13.1
79.8
32.5
180.0
146.9

-3.5
18.0
10.7

-23.0
104.6
24.8
159.6
135.8

-7.6
15.5
1.1

-50.1
154.7
50.1
156.4
135.5

-0.2
32.0
0.0

-16.8
179.9
25.2
158.5
136.8

0.9
15.9
5.3

-14.0
195.3
15.4
162.8
139.4

1.9
9.5
0.8

-12.6
205.9
10.5
169.1
142.8

2.5
6.2
-1.3

-9.0
212.9
7.0
176.9
147.1

3.0
4.0
-1.1

-5.4
216.4
3.6
185.5
151.6

3.0
1.9
-1.0

% of GDP

Gross debt ratio
Change in gross debt ratio

44.3
19.3

65.5
21.2

98.9
33.4

113.5
14.6

120.0
6.4

121.8
1.8

120.3
-1.4

116.7
-3.6

Primary balance
"Snow-ball" effect
of which

Interest expenditure
Real growth effect
Inflation effect

Stock-flow adjustments

Implicit interest rate

Contribution to change in gross debt

5.9
2.7

1.4
0.9
0.4

10.7

5.2

12.2
8.0

29.0
4.4

2.2
3.8
2.0

1.1

4.3

3.0
0.1
1.2

0.0

4.6

6.6
2.8

4.1
-0.9
-0.4

5.3

4.5
1.1

4.1
-2.1
-0.8

0.8

1.8
1.3

5.7
-2.8
-1.6

-1.3

-1.1
0.8

6.2
-3.4
-1.9

-1.1

-3.1
0.5

6.0
-3.5
-2.0

-1.0

4.2

3.7

4.9

5.3

5.2

Note: 
Gross debt projections include injections of EUR 10 bn of fresh capital into the banking system in 2010 and EUR 15 
bn in 2011, above and beyond the already announced capital injections.

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