EUOBSERVER / BRUSSELS - A team of experts from the European Commission, the European Central Bank and the International Monetary Fund has given a qualified pass to Ireland's progress in its economic programme, imposed in return for an €85 billion bail-out last November.
"The teams' assessment is that the programme is on track but challenges remain and steadfast policy implementation will be key," the troika experts said in a two-page review of the ongoing austerity and structural adjustment programme.
The troika experts, delivering the first quarterly assessment of the government's programme since the bail-out was delivered six months ago tied to rigid conditions requiring draconian cuts and a restructuring of the economy, submitted their review at the end of a ten-day stay in the Irish capital.
"Ireland is making good progress in overcoming the worst economic crisis in its recent history," the review continued.
"Programme implementation has been determined, despite the period of political change and an uncertain external environment."
Fiscal targets for the end of December last year and the first quarter of 2011 were met "by a comfortable margin".
The troika gave top marks to the new Fine Gael-Labour coalition government for sticking to the EU-IMF programme agreed to by the former Fianna Fail-Green administration.
The new government "has taken full ownership of the goals and key elements of the EU-IMF-supported programme," the troika experts said.
However, the team said that GDP is expected to grow more slowly than previously forecast and domestic demand is also set to contract, albeit at a slower pace than had been expected.
Finance minister Michael Noonan welcomed the news.
"In terms of renegotiating the programme, we have done what we set out to do," he told reporters on Friday, adding that the report was "very satisfactory from our point of view."
The troika also highlighted the importance of reform of sectoral wage bargaining, a statement that immediately provoked a riposte from Siptu, the country's largest trade union. It's president, Jack O'Connor, said the organisation would fight attempts to get rid of sectoral collective agreements and move to company-by-company bargaining.
The new government is set to sign a revised memorandum of understanding with the EU and IMF on 16 May.
Under the new agreement, the minimum wage will be raised back up to €8.65 from €7.65, after the previous administration had cut it under pressure from the troika.
The government is also set to reduce social insurance contributions from employers by 50 percent up to the level of the minimum wage.
For all the sighs of relief at the thumbs up from the troika, not all the news on Friday was good for Europe's western-most nation.
Moody's, the credit rating agency, also cut Ireland's sovereign ration by two notches and kept its outlook negative, suggesting further cuts in the future.
The agency said that the downgrade was in response to the country's weak growth potential and increased borrowing costs due to recent interest rate increases by the ECB.
The firm also said that the low growth prospects are a result of the austerity being imposed and a continuing private-sector credit squeeze. Paradoxically, at the same time, Moody's also said that the government's financial strength could decline further if Dublin were unable to stick to its planned austerity path.