Ireland and Portugal budget for life after bailout
For those bailed-out countries caught up in the euro zone's financial crisis, it probably seemed as though the tough austerity and scrutiny would never come to an end.
Yet, after three years, two of the rescued countries, Ireland and Portugal, are inching closer to the exit door.
The markets have been welcomed moves by both countries this year, particularly Ireland, to return to the international bond markets. But there are concerns that, if they do not have a "back-stop", they might struggle. And if the euro zone recovery both countries are banking on does not continue, they could suffer even more.
(Read more: Ireland says may exit bailout without EU backstop)
Ireland and Portugal announced their respective budgets on Tuesday. Both spending plans were approved by the countries' international creditors, the so-called "troika" of the International Monetary Fund, fellow euro countries and the European Central Bank.
Ireland, which was bailed out with an 85 billion euro ($114 billion) loan in 2010 when the cost of propping up its collapsed banking system became too great, is on course to exit from bailout in December. The Dublin government unveiled a spending plan which was notable for softening some of the expected tax hikes and spending cuts, ahead of its planned.
Yet this exit is unlikely to be a clean break from the bailout era, even though Taoiseach (Prime Minister) Enda Kenny proclaimed that the "economic emergency" which has engulfed Ireland in the past few years is "over".
"Kenny is talking the political game," Mark Wall, co-head of European economics research at Deutsche Bank, told CNBC.
"There will be some kind of post-program support. The last thing the troika wants is the country going wrong – it has to protect its own investment."
(Read more: Ireland risks long-term pain for short-term gain)
That support is likely to come through something like a guarantee of the tracker mortgages on Ireland's banks' balance sheets by the European Central Bank (ECB). As many of these mortgages are now loss-making because of low interest rates, they are proving to be a burden on Ireland's banks, and in turn for the Irish state which bailed them out.
Ireland has dipped its toes into the bond markets already, with a successful small sale of five- and 10-year debt this year. And the National Treasury Management Agency (NTMA), which manages Ireland's hefty national debt, has said it won't make any further medium or long term bonds until early next year, a sign that it believes it is well-funded.
There are some grounds for the markets' optimism. Surveys of business and investor attitudes, which are often good early signs of how the economy is performing, are pointing to some level of improvement for the first time in six years.
Portugal looks like it will be slower to return to the market – and the threat of a second bailout has not entirely receded. The country was rescued in 2011 with a 78 billion euro loan when it got swept up in the euro zone debt crisis and came close to collapse.
The most likely outcome for Portugal is an enhanced conditions credit line (ECCL), essentially a mini-bailout which would mean that the country is still under observation by international lenders, Gilles Moec, co-head of European economics research at Deutsche Bank, told CNBC. However, this would enable the country to be the first to take up the ECB's offer to buy up unlimited amounts of a country's bonds to help stabilize its borrowing costs.
"I would prefer for the plan to be extended over another two years, because what will probably happen is a fragile arrangement," Moec said.
Portugal is also planning to lower corporation tax next year, which could help attract more external investment, although it is unlikely to benefit in the way Ireland has from its low corporation tax because of fewer English-speaking workers.
European authorities are putting off making vital decisions on Portugal's future because there is no imminent deadline, Moec warned.
Follow us on Twitter: