DUBLIN (Reuters) - The International Monetary Fund (IMF) kept up the pressure on Ireland not to ease off on austerity just days after Finance Minister Michael Noonan said next month's budget may not need to be as tough as planned.
Irish ministers have been campaigning for months to use the slack afforded by a bank debt deal struck with the European Central Bank to bring in a less stringent budget than the 3.1 billion euro ($4.2 billion) package originally pencilled in.
While the IMF, Ireland's central bank and, most recently, ECB Executive Board member Joerg Asmussen have said the money should be held to cushion the weak economy against any shocks, Noonan said on Tuesday that there was some flexibility on the severity of tax hikes and cuts.
After disbursing the next $1 billion aid tranche to Ireland on Wednesday, the IMF, which monitors Ireland's bailout along with the ECB and European Commission, said Dublin should keep up its track record of steady fiscal consolidation to protect its regained access to bond markets.
"While budget execution remains on track in 2013, narrow buffers make continued careful implementation essential," David Lipton, first deputy managing director of the IMF's Executive Board said in a statement on Thursday.
"The budget for 2014 should set out targets for cumulative consolidation in 2014-15 consistent with prior medium term fiscal statements."
Ireland's medium term fiscal statement maintained the 3.1 billion euro adjustment figure for next year when it was revised in April. The government must make more cuts in health, social welfare, and education spending as well as fresh tax increases.
The IMF added that resolving nonperforming loans is key to a lasting revival in bank lending, and it urged the authorities to make sure a new framework for dealing with insolvent borrowers functions effectively to accelerate the progress.
In the quarterly update of its agreement with the three lenders, also published on Thursday, Dublin said it would consider introducing a fast-track court process to speed up repossessions of buy-to-let properties by the end of next month.
Ireland's stock of mortgage debt is a major impediment to the country's economic recovery as it prepares to complete the bailout later this year, and there remains a risk that the government will have to inject further capital into its lenders.
(Reporting by Padraic Halpin; editing by Ron Askew)