The Organisation for Economic Co-operation and Development says Ireland is emerging from its difficulties, with economic activity and employment slowly recovering.
In a survey of the country published every two years, the Paris based organisation says Ireland’s national debt should peak this year, and is approaching a turning point.
It says Budget strategy rightly aims at putting the national debt on a sustained downward path.
It says reinvigorating long term growth will be essential to ease the burden left by the crisis.
The report urges the Government to persevere with the conditions and targets of the EU-IMF programme and reduce the budget deficit to “below 3% of GDP by 2015″.
This implies the Government may have some €600m to €700m available to ease back on Budget adjustments, and still hit EU targets – if growth lives up to expectations.
If the Government makes the full budget adjustment for 2014, it should achieve a primary surplus – that is it will take in slightly more money than it spends, excluding debt interest costs.
If growth does not materialise as strongly as forecast, the OECD does not recommend going beyond the terms of the bailout programme.
It says longer term challenges to budget sustainability come from rising spending pressure in the health system and from the pension system.
On the banking situation, it notes that Ireland has the second highest level of no-performing loans in the OECD.
The OECD says the risk of a lost generation calls for decisive intervention in the youth labour market. It says because of high and persistent rates of youth unemployment, activation policies are “paramount”.
Ireland has the highest share of young people on income support in the EU – 30%. It was already higher than the OECD average – at 10% – before the recession in 2007. Today it is more than three times the OECD average.
It recommends the Dutch model, under which any person aged 18 to 27 seeking social welfare benefits must be offered either work or training or a combination of the two.
“Young people cannot remain inactive, and must accept an offer in order to get social benefits”. It says such an approach keeps social exclusion and marginalisation at bay.
The internship programme – Jobsbridge (8% of spend) is criticised for not being a real internship programme, in that it does little to give first work experience to young people and is more like an incentive scheme for employers.
Unlike most OECD countries, Irish people with only a general education qualification have a higher employment rate than those with vocational training.
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