Moody's debt analyst says more cost-cutting measures needed
Published 15/06/2010 | 05:00
A LEADING debt analyst said yesterday he was "impressed" by the public's acceptance of government cost-cutting, but warned more is needed and other highly-indebted European countries must follow suit.
Speaking at a function in Dublin last night, Moody's senior sovereign ratings analyst Dietmar Hornung said: "I've been impressed by measures undertaken by the Irish authorities and willingness of the electorate to go through with these measures."
He told the seminar, hosted by the Institute of International and European Affairs and the Law Society of Ireland, that there "is no alternative to fiscal consolidation (cutting government debt and deficits) in the countries that are in focus".
Earlier, in an interview with news agency Bloomberg, Mr Hornung said that the Irish economy was "set to turn the corner", after contracting about 10pc over the past two years.
"Ireland is a flexible, competitive economy, but is vulnerable to a slowdown in global growth and liquidity drying up," Mr Hornung said. "These are the big risks."
While the unemployment rate here has been growing over the past two years, to 13.7pc as of last month, the analyst said that multinationals investing in the country "seem to be in good shape, but the economy needs to expand again to achieve growth targets".
He added: "Without that, additional fiscal measures will be needed."
Moody's cut Ireland's credit rating by a single grade to 'Aa1' -- or one level below its top-notch 'Aaa' rating -- last July and assigned the country a 'negative' outlook, citing an increasing debt burden and a "sudden and brutal economic and financial adjustment".
Mr Hornung said the rating and outlook were "appropriate", given that the debt situation "is still deteriorating".
However, author and analyst of the global financial system, Ann Pettifor, told the seminar that the new consensus across EU governments for austerity packages amounted to "madness".
Ms Pettifor said that such measures would "lead to an immense (economic) contraction across the globe" and further impact countries' ability to repay their debts.
"EU austerity is going to have a global impact," she said, advocating that EU States should actually increase spending "to help economies to recover".