Three years after turning to the EU and International Monetary Fund for €85 billion in aid, Ireland is poised to become the first bailed-out eurozone country to make a full return to financial markets.
Ireland was brought to the brink of collapse in 2010 by a real estate crash that forced the government to backstop the country's banks, sending its budget deficit soaring and the cost of new borrowing to punitive levels.
The rescue package was made up of €45 billion worth of emergency loans from the EU, €22.5 billion from the IMF and €17.5 billion from Ireland's own reserves and pensions.
In return, the government pledged to introduce a four-year austerity plan, including deep cuts in spending and public sector employment, higher taxes and a lower minimum wage.
By the end of 2014, the savings will have totaled €16.4 billion, equivalent to about 10% of annual gross domestic product.
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The Irish government said Thursday that it would exit the program as planned on December 15, choosing to forego the security of a credit line from the EU's bailout fund.
That will leave it completely exposed to the whim of the market, and unable to access the European Central Bank's untested bond-buying program at a time when the outlook for the broader European economy remains shrouded in uncertainty.
Ireland's economy is growing again, unemployment is falling, and the budget deficit is due to fall to below 3% of GDP in 2015. But the country's debt pile is among the highest in the EU, at about 125% of GDP.
Ireland said it was confident it could go it alone because borrowing costs had fallen dramatically -- currently around 3.5% for its 10-year bond, compared with 9% in 2010 -- and €20 billion of cash reserves would cover its funding needs until early 2015, a view shared by the IMF.
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"Although uncertainties remain in Europe and the global economy more broadly, Ireland is in a strong position in terms of its bond yields and has built a sizable cash buffer," said IMF managing director Christine Lagarde.
The conclusion of the rescue package is a rare piece of good news for policymakers in Europe, where the economy is flatlining. Portugal's bailout expires in June 2014 but its bond yields are still at a painful 5.8%, and Greece is struggling to plug a hole in its second bailout program. Cyprus, the fourth eurozone recipient of a sovereign bailout, is contracting rapidly.
"Graduation from the program will send a very clear signal to markets and international lenders that the adjustment effort undertaken in Ireland, with the support of its European and international partners, has paid off," said EU finance chief Olli Rehn.
