I welcome the opportunity to update the House on the outcome of the first and second quarterly programme review of the EU-IMF programme of financial support. Since taking office, the Government has addressed the banking situation, with the measures set out in the announcement made on 31 March. The Government has also engaged in a more co-operative fashion at European level with a view to restoring Ireland's position within the European Union. This approach will continue at this month's Eurogroup and ECOFIN meetings, where we will continue to pursue our case for a reduction in the cost of the programme.
The benefits of this greater engagement are already apparent. Deputies will be aware that last month the Government successfully concluded the first and second quarterly programme review mission with the EU Commission, the ECB and the IMF, that is, the troika. The purpose of the review was to evaluate performance against targets to date on all the elements of the programme of financial support for Ireland, including fiscal developments, the macroeconomic outlook, progress on commitments in the restructuring of the financial sector and structural reform.
During this programme review, a number of my Cabinet colleagues and I, along with senior officials, met representatives from the troika and assured them of the Government's commitment to the fiscal targets set out in the EU-IMF programme. In the negotiations with the troika, the Government outlined the policy priorities that it wished to have included in the revised programme. I am happy to say there was sufficient flexibility within the programme to allow us to include these important policy measures, while respecting the overall fiscal parameters and goals of the programme.
These policy priorities include measures such as the jobs initiative, the reversal of the minimum wage cut, the comprehensive spending review and important changes to banking policy in areas such as recapitalisation, as well as ending further loan transfers to NAMA. These are included in the draft revised programme documents, which have been circulated for Members' information in advance of this debate. These documents include the revised memorandum of understanding and memorandum on economic and financial policy, the technical memorandum of understanding and the accompanying letters of intent. I have sent these documents to the EU agencies and to the IMF.
The review will be formally completed with the consideration by the Eurogroup, ECOFIN and the IMF executive board of these revised documents, along with the reports by their various staff on progress to date. The final documents will be made publicly available following final approval on 16 and 17 May. It is clear that the conditions of the programme are being broadly met to date. The fiscal programme is on track and important progress has been made in addressing banking sector challenges.
It is encouraging that the fiscal programme is on track. The targets set for the Exchequer primary balance — the Exchequer balance excluding interest costs — for both the end of December and the end of March were met by a comfortable margin. The targets for net central government debt for the same periods were also achieved. We remain on course. My Department will publish data later this afternoon which will show that, in broad terms, spending and tax outturns to the end of April are in line with expectations. The details will be published as usual at 4.30 p.m. today.
However, it remains the case that further significant budgetary adjustments will have to be made in the coming years so that we align more closely the State's revenues and its spending and reduce our levels of borrowing. We cannot continue to spend more than we earn. This is simply not sustainable. It is important to ensure that our debt level, although high, remains on a sustainable path if we are to be in a position to return to accessing market funding as soon as possible.
During the review mission, we reaffirmed our commitment to achieving a deficit of less than 3% of GDP by the end of 2015. We also made it clear that we would adhere to the aggregate adjustment target as set out in the joint programme for the combined period 2011-12. However, we did outline that given the current degree of uncertainty surrounding the economic growth outlook, we would review progress on deficit reduction in the context of achieving the deficit reduction target by 2015, in preparation for the 2013 budget. We will strive to ensure that future budgetary consolidation is as fair as it can be and that it does not overburden those in most difficulty.
Budgetary reform to strengthen our fiscal framework is an important element in the Government programme and it is also something that we are committed to implementing under the terms of the EU-IMF programme of financial support. In November 2010, the Joint Committee on Finance and the Public Service published a detailed report entitled Macroeconomic Policy and Fiscal and Economic Governance. In addition, early last month, my Department published on its website a discussion document entitled Reforming Ireland's Budgetary Framework with a view to assisting debate and setting out a range of policy options in this important area.
Within the next number of weeks, my Department will hold a seminar to advance the discussion on fiscal reform. In addition, under the EU-IMF programme, we are required by the end of June to establish the proposed fiscal advisory council. We are also required to introduce a fiscal responsibility Bill by the third quarter of this year. Work is advancing on both fronts.
The macroeconomic outlook was also discussed during the negotiations with the troika. There was a general consensus that the Irish economy will return to growth this year, albeit at a more modest level than envisaged at budget time. The latest official forecasts were set out in last week's stability programme update. GDP is forecast to grow by around 0.75% in 2011 and 2.5% in 2012. This growth is largely export led, with a gradual improvement in domestic demand. For the period 2013 to 2015, the Irish economy is forecast to grow by 3% per annum on average.
As Deputy McGrath pointed out yesterday, 0.75% growth is not very dramatic. However, it is worth putting this in context. In 2008, the economy declined by 3.5%. In 2009, it declined by 7.6%. In 2010, contrary to predictions, it declined by 1%. That is a decline in the economy of over 12% in the last three years. In the fourth year of the cycle, we now have growth in the economy and it is beginning to accelerate. It may not be what was predicted at budget time, but when we take a figure of minus one for 2010, then 0.75% for 2011 means there is a lift of 1.75%. The projection for 2012 is 2.5% and it is 3% for 2013 and 2014.
If we can get more confidence back in the economy, continue the export-led drive and concentrate on different sectors of the economy where growth and employment are possible, and if we can encourage people with savings to start spending again in the consumer market, then we may be able to get those growth figures up another bit. The overall strategy of the Government must be to grow the economy and to get people back to work and to start paying our way again. The situation is improving and we see the level of the improvement when we look at the decline in growth for three years in a row, which has now been replaced by the start of an upward growth pattern.
As outlined in the stability programme update and in the discussions with the troika, there is a high degree of uncertainty surrounding macroeconomic projections for Ireland and the world at this time. Due to this, we consider it prudent to review progress on deficit reduction in preparation for the 2013 budget. Our immediate priority is to support enterprise, restore confidence to the economy and get people investing and spending to create sustainable employment. To that end, next week we will be presenting a jobs initiative to the House. The measures to be introduced to assist in the generation of employment have been outlined in broad terms in the programme for Government. The measures are designed to lift public morale and confidence in the economy, to provide jobs, to provide suitable job placement for unemployed persons and to encourage spending by consumers. It became clear during the review mission that there was sufficient flexibility within the programme to allow us to include this important initiative, while respecting the overall fiscal parameters and goals of the programme.
This Government is committed to protecting the vulnerable, which is why we are committed to reversing the recent cut in the minimum wage. The effect on business costs will be offset by a reduction in employers' PRSI. In addition, we are reviewing the employment regulation orders, or EROs, and the registered employment agreements, or REAs, and are promoting other measures to increase competition in sheltered sectors of the economy. All of these measures are part of a comprehensive package designed to make work pay and improve the competitiveness of the economy.
The review group on State assets and liabilities published its report on 20 April 2011. As set out in the programme for Government, non-strategic assets up to a value of €2 billion will only be sold when market conditions are right and when adequate regulatory structures are in place. The review group has been clear that it does not favour a fire sale. As the Government comes to a view on what parts of the report's recommendations it wishes to implement, we will agree with our EU-IMF colleagues on the appropriate use of realised funds, with a view to getting the right balance between debt reduction and growth stimulation.
There are several structural measures in social welfare to which the Government is committed under the revised memorandum of understanding. This includes a commitment to reduce the risk of long-term employment though a number of initiatives such as reforming the unemployment benefit system and taking steps to tackle unemployment and poverty traps. The Government is also committed to reforming the system of labour activation policies by improving the efficiency of the administration of unemployment benefits, through social assistance and active labour market policies, enhancing conditionality on work and training availability and the introduction of instruments to identify better job seekers' needs — this is known as profiling — and increased levels of engagement, including the application of sanction mechanisms for beneficiaries who do not comply with the conditions of job-search.
These measures are linked to other structural changes with the transfer of FÁS employment and community services programmes to the Department of Social Protection. Changes in working age payments and to rent supplement are part of the structural commitments within the EU-IMF programme. They will also assist with the budgetary stabilisation process.
Among the other structural measures to be progressed this year are an assessment structure for water provision and charging, and also a review of the energy sector with particular reference to electricity and gas sectors. Reform of personal insolvency and bankruptcy laws is also proposed to assist persons to re-engage in economic activity in society.
The review by the external authorities notes the good progress we have made in restructuring of the banking system. On the wider banking landscape, we have met the target of carrying out the assessment of the capital and liquidity needs of the banks and the results were published at the end of March. I will not repeat in detail what I dealt with in my statement of 31 March to the House, but I believe the assessment gives us a firm estimate of the needs of recapitalising and restoring the banking system and a framework for how this will be achieved in the coming years. Central to that framework is the deleveraging of the banks to make them smaller but more robust and reduce their dependency on funding from central authorities so that they can re-enter the markets in the future to a greater extent.
I set out on 31 March the outline of the approach to the banking sector including the establishment of two pillar banks, the effective amalgamation of the EBS into AIB as part of that process and the selling off from Irish Life & Permanent of the life assurance business. Under the programme of financial support, the Government was committed to submitting a plan to the EU Commission by end-January for the resolution of Anglo Irish Bank and INBS. This deadline was met and a plan to wind down these institutions is with the Commission awaiting its decisions. In the meanwhile however, we are pushing ahead with the overall strategy and, to this end, the deposits and matching assets were transferred out of the institutions in February. The path forward has now been set for these two bodies. The Central Bank is reviewing the capital needs of the two bodies and the results will be available in May. Should additional capital be needed the Government will be involved in consultation.
The Government has shown determined action in tackling banking issues and these plans will develop a new banking sector better matched to the needs of the economy, and help the banks play their role in funding economic revival. I should also note that proposals for a new banking resolution regime were published at the end of January and this matter will be coming before the House soon for debate. This also will help in the future to deal with banking crises.
The Central Bank will continue to build on the programme of initiatives already underway in the area of banking supervision. It will further strengthen its capacity to supervise credit institutions by reinforcing its staffing levels and expertise. The Central Bank will also enhance its risk assessment and monitoring framework, including the collection of relevant data from the banking system, particularly drawing on the lessons learned in the PCAR process on data validation and integrity and asset quality review.
I will publish legislation before the summer to enhance the supervision and enforcement powers of the Central Bank. This legislation will take on board:——