Reuters | Sep 17, 2010 | 10:22pm IST
Ireland’s finance ministry and the International Monetary Fund sought to calm markets on Friday after a newspaper report on the possibility of an IMF bailout sent investors running for cover. The cost of insuring Irish sovereign debt against default hit a record high and the Irish/German spread reached a euro lifetime peak after the Irish Independent newspaper said Ireland was "perilously close" to calling in the IMF and the EU. The IMF told Reuters it did not foresee its financial assistance would be needed for Ireland and praised Dublin’s efforts at propping up its banking system. Ireland’s Department of Finance slammed the Irish Independent article. "There is absolutely no truth to a rumour concerning external assistance. It is based on a local misinterpretation of a research report," a spokesman said in a statement.
The newspaper used a report from Barclays Capital as the basis for the article. Barclays said Ireland’s liquidity position was comfortable but if unexpected banking losses emerged or economic conditions deterioriated outside help may be needed. "The report is a lot more measured than what has been reflected in the newspaper," said Geraldine Concagh, a senior economist in Allied Irish Banks. "The market is very nervous at the moment." A combination of costly bank bailouts, anaemic growth and the worst budget deficit in the EU have stoked fears of a full-blown debt crisis and Finance Minister Brian Lenihan is under pressure to ramp up efforts to get the finances in order.
“It’s a bit like waking up the patient in the middle of an operation to tell him he’s not feeling well,” John Corrigan, the chief executive of the National Treasury Management Agency (NTMA) told Reuters Insider television. “We know the situation is pretty painful but we have to get to the end of the operation which will be in December.” S&P hiked its estimate of the cost to the government of recapitalising the banks at 45-50 billion euros ($63 billion), a figure dismissed by the debt agency in highly unusual criticism. Corrigan described S&P’s analysis as “flawed”. Fellow euro-zone peripheral Portugal managed to raise 1.3 billion euros in bonds on Wednesday but demand was below Ireland’s auction last week and the cost of protecting Irish and Portuguese debt against default rose. Rating agencies have been steadily hacking away at Ireland’s credit rating and S&P’s is now on a par with Fitch and one notch below Moody’s, which cut its rating to Aa2 last month. Both Fitch and Moody’s have stable outlooks. Continue reading
BBC News | 19 July 2010 | 07:11 GMT
Ratings agency Moody’s has downgraded the Irish Republic’s sovereign bond rating to Aa2 from Aa1. The ratings agency said the move had been driven by the government’s gradual but significant loss of financial strength. And it expects the country’s economic growth to be below its historical trend in the next three to five years.
In June, it was revealed the Irish Republic had officially moved out of recession in the first quarter of 2010. Ireland has suffered a severe contraction in GDP since 2008, causing a sharp decline in tax revenue. And Moody’s said the banking and property sectors, which had driven the economy before the global economic downturn, would not contribute strongly to overall growth in coming years. It also pointed to the country’s swelling levels of debt as a reason for the downgrade.