Report della Commissione UE sull'Irlanda
Ireland expected to return to markets in 2012
By John Murray Brown
Published: February 14 2011 16:18 | Last updated: February 14 2011 16:18
The European Commission is banking on Ireland being able to return to the debt markets in the second half of 2012, at least a year earlier than many traders had forecast.
In an occasional paper published this week, the Commission calculates that Ireland will have drawn down €30bn ($40bn) of the €50bn earmarked under a rescue by the European Union and International Monetary Fund by the end of this year. The Commission said €17bn will be disbursed in 2012 and the rest the following year.
The remainder of the €85bn bail-out is targeted at the crippled banking sector.
The Commission said: “The Irish government does not need to tap international bond markets until the second half of 2012 but will gradually return to the markets thereafter."
However Alan McQuaid, bond analyst with Bloxham stockbrokers in Dublin, cast doubt on the timetable. He said Ireland’s 10-year bonds were trading at yields of 9.05 per cent on Friday – almost 600 basis points over benchmark German Bunds.
Ireland is borrowing from the EU at a blended rate of 5.82 per cent. “The government will want to be somewhere in the 5.50 range before it wants to start borrowing again. We’re a long way from that, I’m afraid. The big question really is whether the EU-IMF money is going to be enough.”
Alan Dukes, the government-appointed chairman of the nationalised Anglo Irish Bank, said this week that Irish lenders would need an extra €15bn – on top of the €35bn provided under the EU-IMF programme.
The Central Bank of Ireland is to publish fresh bank stress tests by March 31 under the EU-IMF deal. The French Banking Commission and the Bank of Italy are “to carry out a peer review in order to strengthen the external credibility of the exercise”.
Of the €35bn, €9bn was meant to have been injected this month. But Brian Lenihan, the finance minister, this week deferred the capital increases until after the general election on February 25.
The Commission made clear on Friday that it expected any incoming government to make capital injections “as soon as possible” to ensure compliance with the EU-IMF agreement. “We understand this is temporary and the Irish authorities will proceed as soon as possible with this recapitalisation in order to bridge this capital ratio of 12 per cent as agreed under the program,” Amadeu Altafaj, spokesman for Olli Rehn, the economic and monetary affairs commissioner, told reporters in Brussels.
The centre-right Fine Gael party has made clear that if its forms the next government, it wants a reduction in the interest rate that Ireland pays on the EU assistance.
A report by Bruegel, the Brussels-based think-tank, said Ireland faced a fiscal adjustment of “frightening magnitude”.
It calculated that Ireland needed to generate an annual primary budget surplus averaging 3.3 per cent of gross domestic product over 2015-2034 to restore the debt to GDP ratios to 60 per cent, the EU’s target under the Maastricht guidelines for eurozone members.
However, with a cut in the interest rate charged by the European financial stability facility to 3.5 per cent, this could be achieved with a primary surplus of 2.1 per cent.
Although the same report concluded that Greece would require a debt restructuring, Bruegel said that with an interest-rate cut the adjustment needed in Ireland “remains within the range of what has been achieved in historical experience.”
