Business Irish

Wednesday 3 September 2014

Athens debt deal may be model for Ireland, say analysts

But Noonan remains adamant that Greek solution not for us

Donal O'Donovan

Published 29/06/2011 | 05:00

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THE Government here thinks a French plan to allow Greece up to 30 years to repay some of its debts "is not relevant to us", but analysts disagree.

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France is brokering the deal with its own banking sector as part of a process to ensure that lenders to Greece shoulder some of the burden of bailing out that country.

Germany is set to follow suit.

The deal will see banks that own Greek government debt agree not to demand full repayment when it falls due.

The money will be repaid to the banks by Greece as it falls due but 70pc will then be reloaned on slightly better terms.

Although the Government here disputes this, analysts say the deal needs to be closely watched in Ireland, because it could well prove a model down the line for this country.

Yesterday, economists at Goodbody Stockbrokers even said the plan could be a model for dealing with Irish debt.

"It is likely that if the plan takes shape over the next few weeks, the model is likely to be replicated for Ireland," said Dermot O'Leary, an economist at Dublin-based Goodbody, in a note to clients.

Last night, however, a spokesman for the Minister for Finance rejected that view. He said the French plan for Greece was simply "not relevant to Ireland as a sovereign borrower".

That view is in keeping with the view of Finance Minister Michael Noonan that "Ireland is not Greece".

Even so, the plan will be closely watched here, not least because it could make it easier for Greece to grow into its debt burden over time, while Ireland pushes ahead with cuts and tax increases.

In London, Elisabeth Afseth, a bond-market analyst at Evolution Securities, cautiously backed the Irish Government's perspective, but only if the bailout programme stayed on track and there was no new shock to the wider economy.

"I don't think there will be a rush from Ireland to get a similar deal," she said.

Ms Afseth said that was because of clear differences between the Irish and Greek debt profiles, which limit the positive impact that a Greek-style deal would have here in the short to medium term.

The Greek deal focuses on extending the repayment time on debt falling due over the next two years, which is a huge proportion of that country's total government debt.

Repayments

By contrast, Ireland has very little debt falling due before 2014, with really substantial debt repayments not falling until 2016 and beyond.

Ms Afseth said that meant Ireland would gain nothing up front by trying to rope banks into a deal like the one now being discussed for Greece.

It also meant there was no reason not to stick with the Irish Government's current preference of trying to get back into the normal debt markets in 2012 and 2013. She said that Ireland would only seek a Greek-style term out of bonds if that process came unstuck.

Ms Afseth added that whether or not Ireland could get back to borrowing from the markets by then was simply not known, although changes to the European Stabilisation Mechanism agreed by eurozone finance ministers this month meant that borrowing was now at least a possibility for Ireland.

Irish Independent

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