Ireland confident of reaching debt deal
The Irish government said it was confident of reaching an agreement with its creditors to reduce the mammoth debt burden incurred during its rescue of the banking sector.
During the launch of Ireland’s six-month presidency of the European Union, deputy prime minister Eamon Gilmore told journalists in Dublin that his country was regaining the trust of the financial markets.
He pointed to Tuesday’s five-year government bond auction, which raised 2.5 billion euros at an interest rate of 3.35 per cent, saying it highlighted the “distance we’ve come” since the country’s 2010 bailout.
Gilmore insisted that Ireland was determined to be the first struggling euro zone country to exit the aid programme, ahead of Greece and Portugal, after rediscovering the path to growth.
But with unemployment running at 14.6 per cent -- double for the young -- and a public debt of around 120 per cent of GDP, he warned that Ireland’s recovery was “still very fragile” and would “require the support of of Europe”.
Ireland is expected to use its six-month presidency to push its long-stated case for Europe to help the government reduce its debt burden, arguing that it would spur growth and job creation.
The economy’s next test comes at the end of March with the maturing of bonds worth 3.5 million euros -- equivalent to this year’s targeted deficit reduction.
Dublin hopes to achieve this by renegotiating some of the expensive debt used to recapitalise its ailing lenders and by allowing the European Stability Mechanism to take over its equity stakes in the banks, breaking their toxic link with the government.
The first option must be approved by the European Central bank, with whom Ireland is in negotiations, while the second requires a deal to be struck with euro zone members.
Gilmore said Ireland was paying the price for its decision to save Irish banks, and by proxy the European banks which would have suffered in the event of a Lehman Brothers-style collapse.
“We put our fingers in the dyke, and we’ve been left with our fingers in the dyke,” he added.
Finance Minister Michael Noonan said he had high hopes that a compromise would be reached on the two measures, warning that failure could lead to a return of spiralling borrowing rates.
German authorities have repeatedly stated that, on the issue of bank recapitalisation, Ireland was a “special case”, and would be treated as such.