It's 'ludicrous' to speculate on second bailout, claims Noonan
Published 12/01/2012 | 05:00
FINANCE Minister Michael Noonan has claimed it is "ludicrous" to start speculating that another bailout will be necessary for Ireland.
"It's ludicrous to be talking about a second bailout," Mr Noonan said as inspectors from the IMF and European Commission began their second day of talks with government officials. "It's really speculation by economists who, at the start of the new year, speculate on these matters," he added.
The Finance Minister was reacting to warnings about Ireland's future from some of the world's top economists over the past few days.
Harvard University economist Kenneth Rogoff told an audience in Bangkok that Ireland could default. Mr Rogoff said it would be a "a very, very, very fortunate outcome" for Europe if Greece is the only country to default.
Mr Rogoff's comments followed similar ones earlier in the week. On Tuesday, Goodbody Stockbrokers issued a detailed report on the Irish economy which suggested that a second bailout would be necessary if the European Commission did not find some mechanism to allow the Government to delay the repayment of our debts.
Later the same day, Nobel prize-winning economist Nouriel Roubini tweeted that Ireland "is clearly double dipping" as fresh manufacturing figures showed a sharp contraction in output in November.
On Monday, well-respected Citigroup economist Willem Buiter said Ireland should negotiate a stand-by bailout in case it is needed.
While Mr Noonan dismissed talk of another bailout yesterday, other cabinet ministers have warned in the past that a second bailout was inevitable unless the country's debt burden is reduced.
Transport Minister Leo Varadkar said last summer that it was "very unlikely" to resume borrowing in 2012 and added that we might need a second bailout.
Public Expenditure and Reform Minister Brendan Howlin has also said that we may default unless the terms of the loans used to bailout the banks are changed.
While Mr Noonan reiterates that Ireland will not need another bailout, economists fret that the debt mountain is rising quickly. Goodbody calculates that the debt to gross domestic product ratio will rise to 124pc in 2014. That would mean that 17pc of government expenditure would be gobbled up by interest repayments.
Mr Rogoff, who made his reputation by studying financial collapses during the last 800 years, said countries decide to go bust.
Greece, which is currently locked into talks with creditors over the scale of the country's planned default, has been told by Germany and France that no further money will be given to Greece until those talks end. Greece is due to run out of money in March.
"Most countries default long before they really couldn't pay," Mr Rogoff said. "They choose to default. That's clearly the case with Greece today."
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