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Ireland to go it alone after bailout exit

Ireland to go it alone after bailout exit

Dublin (AFP) - Ireland will stand on its own two feet when it becomes the first eurozone nation to exit a bailout after the government on Thursday refused a precautionary credit facility.

The Department of Finance said that it would not need a backstop when on December 15 it exits its EU-IMF bailout programme that has been worth 85 billion euros ($114 billion) to the small island country.

Ireland said it was able to go it alone owing to large state cash reserves and public finances that are under control amid a climate of historically-low Irish government bond yields.

"Following a careful and thorough assessment of all of the available options... the Irish government has today decided that Ireland will exit the EU/IMF programme in December as planned and without a pre-arranged precautionary credit facility," the statement said.

Ireland last week passed a final stringent review by the European Union and International Monetary Fund.

That left Dublin to decide whether a precautionary credit line, or insurance fund, was needed in case market conditions become unfavourable once it exits the bailout safety net.

"The Irish government?s assessment is that the best option for Ireland is to exit the programme as planned in December without a pre-arranged backstop," the statement on Thursday said.

"The market and sovereign conditions are favourable towards Ireland with the country returning to the markets in 2012, holding over 20 billion euros in cash reserves at year end which we can use to ensure that we can meet our maturing commitments and funding costs till early 2015 and (with) Irish sovereign bond yields at historically low levels.

By declining a precautionary credit line Ireland is giving up possible intervention on the bond market by the European Central Bank to support Irish debt costs.

IMF Managing Director Christine Lagarde said "Ireland is in a strong position in terms of its bond yields and has built a sizable cash buffer".

EU Economic Affairs Commissioner Olli Rehn

Ireland set for full return to markets

The bailout exit, after the rescue in November 2010, will result in Ireland fully returning to the international lending markets. Dublin will also have an increased level of independence in economic decisions after accepting stringent oversight in exchange for the emergency funding.

"Domestic and international economic conditions are improving, monetary policy decisions are conducive to exit and confidence and sentiment towards Ireland has improved considerably in recent months," Thursday's statement added.

Finance minister Michael Noonan said "it was in the best interests of the country not to look for a precautionary line".

A precautionary credit line from the EU's new ESM bailout fund would have come with oversight, but have enabled the ECB to possibly buy up Irish debt under its as yet untested Outright Monetary Transactions (OMT) programme.

But arriving in Brussels for a eurozone finance ministers meeting, Noonan added: "I don?t think this sets a precedent (for other bailed-out nations)."

Other eurozone countries to have been rescued are Greece which was the first, Portugal and Cyprus. Portugal is expected to be the next country to exit a bailout programme.

Ireland's economy crashed in 2008 after a decade of almost double-digit growth fuelled by cheap credit and a booming construction and property sector.

After coming to power in a general election called in the months following the bailout, Prime Minister Enda Kenny's coalition government continued to implement the stringent austerity measures required under the terms of the programme.

The deficit has fallen considerably from pre-bailout levels with Dublin estimating its deficit will be 4.8 percent of gross domestic product (GDP) in 2014 and 2.9 percent in 2015.

"The public finances are under control in Ireland," the finance department statement said.

Ireland meanwhile made a partial return to the markets last March, raising five-billion-euros in their first ten year government bond since before the bailout.