Ireland's austerity paying dividends

DUBLIN - Ireland's three-year bailout ordeal ends this weekend, a victory in the nation's battle against bankruptcy. But while the government is ready to finance itself without aid, the Irish can't yet escape what has become Europe's longest-running austerity program.

Ireland faced ruin in 2010, when the runaway cost of a bank-bailout program begun two years earlier destroyed its ability to borrow at affordable rates. European nations and the International Monetary Fund came to the rescue with a three-year loan package worth $93 billion.

The last of the money arrived in Ireland's state coffers this week. On Sunday, Prime Minister Enda Kenny will address the nation on television to salute the financial rebound that has eluded the eurozone's other bailout recipients, Greece, Portugal, and Cyprus.

Unlike those countries, Ireland has repaired its fiscal reputation by exceeding a series of deficit-cutting targets, and avoiding labor unrest and protracted recession. That surprisingly strong performance has allowed Ireland since mid-2012 to resume limited auctions of long-term bonds at affordable rates, essential to life without a European Union-IMF safety net.

Ireland's treasury also has built up more than 20 billion euro in reserves that would permit the state to pay its bills through 2014 without any immediate need for renewed aid.

International confidence that Ireland can resume financing its debt repayments on its own means the yields - the effective interest rates - on 10-year Irish bonds have fallen below 3.5 percent from 2011 highs exceeding 15 percent. That's lower than in Spain, which has received emergency bank support but which avoided a full-fledged bailout, and Italy, which has one of the eurozone's worst per capita debts.

The most obvious evidence of renewed confidence is all the "sold" signs suddenly appearing in Dublin, home to nearly a third of the country's 4.6 million residents and center of a property bubble that burst to disastrous effect in 2008. Property prices had slumped more than 50 percent in the five years since as credit crumbled, banks drowned in toxic assets, and hundreds of thousands of homeowners became trapped in negative equity. But the market is finally stirring again.

Ireland still faces a mountain to climb to achieve its key goal of reducing annual deficits to below 3 percent of gross domestic product, the limit all 17 eurozone nations are supposed observe.

It recorded an EU record deficit of 32 percent in 2010, when the bill for sustaining the country's six domestic banks grew so large Ireland's own credit rating crumbled.

But since coming to power in early 2011, Kenny's government has reformed banking regulation, negotiated with the EU to spread out bank-debt repayments over several decades, and imposed tens of billions in annual cuts and new taxes targeting every sector of society.

As part of its reform agenda, EU and IMF chiefs ordered Ireland to impose new charges and limits on the state old-age pension system and on welfare pay for the young, and to introduce a new property tax in line with international practice. A much-debated water tax is still in the pipeline for next year.

Ireland's major economic think tank, the Economic and Social Research Institute, estimated this week that five straight years of cuts had pruned most workers' take-home pay by about 12 percent, and that those who are best off had lost more than 15 percent of their income.