Ireland to exit bailout without credit line backstop; Help on hand if needed
The Irish government today choreographed what it termed an "emergency Cabinet
meeting" in advance of an announcement that Ireland will exit the European
Union-IMF international bailout without what was termed a "precautionary credit
line." The issue of a backstop in the event of an unexpected rise in bond yields
in future was just spin as the European Stability Mechanism (ESM) rescue fund
could be tapped at short notice while the European Central Bank has a
bond-buying programme subject to conditions.
The Department of Finance said in a statement:
The market and sovereign conditions are favourable towards Ireland with the
country returning to the markets in 2012, holding over €20bn in cash reserves at
year end which we can use to ensure that we can meet our maturing commitments
and funding costs till early 2015 and Irish sovereign bond yields at
historically low levels."
Juliet Tennent, economist at Goodbody, commented - - "Following weeks of speculation and intensive meetings between the Irish
Government and the European Commission, the IMF and the ECB, the Taoiseach, Enda
Kenny, has announced that Ireland will not be applying for a precautionary
credit line. The announcement was made ahead of today’s meeting for European
finance ministers where the Minister for Finance, Michael Noonan, is expected to
communicate Ireland’s decision.
The Government cited the following in relation to its decision to exit the
programme without a backstop:
Euro area safeguards and procedures that have been introduced since the onset of
the sovereign debt crises and that offer support to Ireland’s efforts to make a
sustainable and durable return to markets. These include the ESM, the support of
the ECB and the new fiscal regime (two pack/six pack) that the European
commission has implemented,
comfortable funding position that the Irish government is in due to the €20bn
plus in cash reserves available which ensures that the sovereign is funded until
early 2015 and the current historically low levels of bond yields, and,
improvement in the public finances over the programme timeframe which means that
the government in on track to meet its deficit target of less than 3% by 2015
and remains committed to reducing the debt ratio
While this announcement is largely in line with recent speculation and the
government is indeed in a comfortable funding position, we would have preferred
to see the government apply for a precautionary credit line; not only for the
safety net it would have provided but also the additional external surveillance
that would have ensured that momentum in the implementation of the outstanding
bailout programme reforms would be maintained. However, Ireland’s decision to
exit alone shows confidence in its ability to fund itself and may well be viewed
favourably by the ratings agencies, particularly Moody’s."
Enda Kenny, taoiseach, said in the Dáil today:
Alongside the bailout exit in December, we will publish a new Medium Term
Economic Strategy to set out a new sustainable economic pathway back to
prosperity for the country.
This will include a recommitment to bringing Government borrowing down to
sustainable levels during the remainder of this Government’s term of office.
It will be an economic plan based on enterprise, not speculation."
The circular has likely gone out already appealing for ideas.
There will be lots of S_O_ but any project that doesn't recognise weaknesses
and threats is going to be a failure.
Check out our
, at a low annual charge of €25