Ireland's economy is still showing the scars of the financial crisis and will need to be managed very carefully, central bank Governor Patrick Honohan has said as he confirmed he would retire at the end of the year.

Mr Honohan, appointed in late 2009 during Ireland's financial difficulties, said it was a good time to step down as the bank was moving away from a crisis management phase with the economy recovering and banks back in profit.

An academic economist, Mr Honohan oversaw a mass recapitalisation of Ireland's banks and an overhaul of financial regulation. He helped negotiate the international bailout sought in 2010 that Ireland emerged from 18 months ago.

Mr Honohan said: "I don't want to exaggerate the degree to which the crisis damage has been fixed.

"The situation is well on the road to repair but there is a degree of fragility which means management of the economy has to be very, very prudent and cautious.

"A lot of the legacy damage is still there, it's there in households, it's there in firms, it's still there in banks. There is certainly a lot less fragility than there was."

The European Commission backed up Mr Honohan's cautious tone, saying at the end of a post-bailout surveillance mission that while progress continued in Ireland, the legacies of the crisis demand further determined policy efforts.

Mr Honohan's retirement, before his term was scheduled to end in September 2016, means the government must name a successor, who will also sit on the governing council of the European Central Bank (ECB), before parliamentary elections due early next year.

The government is thought unlikely to revert to the pre-crisis tradition of promoting the top civil servant at the Department of Finance to the governor role.