EU moves will make it harder for Ireland to borrow on markets again, say experts
Published 17/03/2011 | 05:00
PROPOSED changes to the European Union's bailout mechanism will make it even harder for Ireland to get back into the bond market, experts warned last night.
Changes to the bailout fund are being considered ahead of a summit on March 24 and 25.
Proposals on the table include making rescue loans drawn down after 2013 senior to ordinary government bonds, including existing bonds.
That means that bondholders of a country receiving the loans would be pushed back in the order to be repaid under any debt restructuring.
The proposals make that more likely too, giving the new rescue fund powers to force debt restructuring on governments that accept a bailout deal.
The new fund, known as the European Stability Mechanism (ESM), is due to replace the European Financial Stability Facility in 2013.
Credit analyst Brian Barry of Evolution Securities said the measures would make it less attractive to invest in Irish bonds, pushing back the date of a hoped-for return to the markets.
"Ratings agencies are already considering this and if this comes into force Ireland could be downgraded along with Greece and Portugal", he said.
Ratings agency Standard & Poor's (S&P) said if the measures are agreed it will consider ratings cuts for countries it thinks would be affected, such as Greece and Portugal.
Brian Barry said Ireland would also have to be included in that group.