The government has been told to keep a close eye on banks to ensure they tackle the mortgage arrears crisis.
The Troika of the European Commission, European Central Bank and the International Monetary Fund said Ireland’s gradual economic recovery is continuing but urged tight monitoring of lenders.
More than 100,000 households are said to be in mortgage arrears of some kind.
Following the tenth review of Ireland’s bailout, the Troika raised concerns about banks tackling the debt issue for homeowners and small businesses, and also about the need for the coalition to rein in health spending.
“After a disappointingly slow start, banks are working towards meeting ambitious targets to ensure a durable reduction in mortgage arrears and the authorities will need to monitor this process closely,” the review found.
The Troika also said in the review that there have been further improvements in market conditions for the country and the banks.
“The authorities have made significant progress on financial sector repair and restoring sustainability to the public finances, yet remaining challenges require continuing policy efforts,” it said.
It added: “Ireland’s economic recovery is continuing, with growth forecast at about one per cent in 2013 and just over two per cent in 2014.
“Weaker than anticipated economic activity in main trading partners is weighing on exports, but domestic demand is somewhat stronger than expected.”
The Troika also noted strong investor interest in the banks and said it reflects the growing international confidence in the austerity regime.
“The strict implementation of Budget 2013 measures, including in the health sector, is essential to meet the government’s commitment to a 2013 deficit ceiling of 7.5% of GDP,” it said.
The Troika review also warned that a pick-up in growth is needed to bring about a meaningful fall in the 14% unemployment rate.