The document discusses Ireland's plan to return to economic growth after the financial crisis. It summarizes actions taken to stabilize public finances through fiscal adjustments, repair the banking system through NAMA and capital injections, and improve competitiveness. It predicts a return to growth in the second half of 2010, with stronger growth and 20,000 new jobs in 2011 and 45,000 jobs annually thereafter, led by increased exports. International confidence in Ireland's recovery plan is also discussed.

1. Returning to Economic Growth May 2010

2. Our plan for economic recovery is working Restoring order to the public finances. Repairing the banking system. Regaining competitiveness to create new jobs.

3. Much has been achieved on the public finances Fiscal correction of 5 per cent of GDP in 2009 and 2½ per cent of GDP in 2010. Without these measures, budget deficit would have ballooned to 20 per cent of GDP.

4. We have stabilised the deficit with decisive actions. EU Commission have endorsed our plan to reduce the deficit to 3 per cent by 2014. Budget balance (% of GDP) *Underlying 2009 General Government Deficit of 11.8% of GDP

5. We must retain our fiscal discipline and deliver €3 billion of adjustments in 2011 € 1 billion adjustment in capital spending already provided for . Will still spend € 5½ billion in 2011 to boost productive capacity in crucial growth sectors. Where will the other €2 billion adjustment be achieved? Reduce cost of public services and reform of how we tax income.

6. We need to reduce spending further Payroll costs must be contained. Certain current expenditure programmes can be scaled back or eliminated.

7. Tax base needs to be broadened Little or no scope for increases in marginal income tax rates. Nearly half of income earners will pay no income tax this year. New universal social contribution to be paid at a low rate on a wide base. Replace employee PRSI, the Health Levy and the Income Levy. Water charges.

8. We have taken the necessary actions to solve the problems in the banking system State guarantee to stabilise funding. National Asset Management Agency to clean up banks’ balance sheets. Recapitalisation of banks and restructuring of the banking system. Reform of the regulatory system.

9. We are in t he ultimate phase in the resolution of our financial crisis NAMA has determined the price for the first tranche of loans, after rigorous loan-by-loan analysis. 51% average discount – aggressive valuations. NAMA has forced the banks to acknowledge reality and recognise their losses. Financial Regulator and Central Bank have set prudent capital requirements. 8% core tier 1 capital requirement, of which 7% must be equity.

10. Banks need additional equity capital to meet the new capital standards Bank of Ireland: €2.7 billion. Private capital raising Significant return to the State from its involvement in the capital raising – includes conversion of preference shares into ordinary equity. Allied Irish Bank: €7.4 billion. Detailed capital plan submitted to Financial Regulator. Can be fully met from the National Pension Reserve Fund. NPRF will hold valuable shares.

11. Getting credit to viable businesses, particularly SMEs. Specific lending targets on two main banks. € 3bn each for new lending to SMEs in both 2010 and 2011. Must include funds for working capital. Must submit SME lending plans both by geography and sector. Credit Review process. SMEs, sole traders and farmers, who have had credit refused or withdrawn, can apply for an independent review of the bank’s decision.

12. Why are we supporting Anglo Irish Bank? Immediate wind-up would lead to: Fire-sale of assets resulting in a permanent additional and unnecessary loss of more than €30 billion. State would have to provide in the order of €70 billion of cash up-front to meet the deposits, bondholders and the liabilities due to the Eurosystem.

13. Stabilising the economy and setting the seeds for renewed growth and new jobs Consensus forecast is for a return to positive growth in the second half of this year. Growth projected to strengthen next year and beyond, led by exports. Net job creation of 20,000 next year, and 45,000 each year thereafter.

14. Improving competitiveness will spur exports Unit labour costs (annual change in 2009, %)

15. Balance of payments is moving toward surplus Chart shows: current account of balance of payments (inc D/Finance forecasts)

16. Consumer confidence and spending are improving Consumer spending* Consumer confidence *Volume of core (excl cars) retail sales. 2005=100

17. Business confidence is improving Purchasing Managers’ Indexes

18. Our polices have boosted international confidence in our ability to recover “ In the case of Ireland very, very tough decisions have been taken by the government and rightly so.” Jean Claude Trichet (ECB) “ Ireland has set the high standard the rest of us must follow.” French Finance Minister, Christine Lagarde “ I think there is a deeply rooted trust and confidence in this country’s ability to sort out its problems. … There is a fundamental belief that the Irish are going to solve it.” German Minister for European Affairs, Dr. Werner Hoyer “ Ireland’s bold and credible measures are paying off. I would agree with Brian Lenihan that the worst is over and the Irish economy is now recovering.” European Commissioner for Economic and Monetary Affairs, Olli Rehn

19. Conclusions Plan for economic recovery is working. Positive growth later this year, leading to employment growth next year. Confidence is returning – externally and domestically. The full implementation of the plan will restore sustainable growth, create new jobs, and deliver economic prosperity.