‘No doubt’ Ireland will overcome crisis -- Rehn
European Union Economic and Monetary Affairs Commissioner Olli Rehn said he’s convinced that Ireland will overcome its crisis as investors dump Irish bonds and borrowing costs soar.
“It might feel a small consolation at times like these, but I have no doubt that Ireland too will overcome this crisis,” Rehn said in a speech in Dublin today.
“You are smart and stubborn people” and “this time you do not face the challenges alone. Europe stands by you.”
The Government is seeking ways to shore up investor confidence amid increasing concern that it won’t be able to pay mounting bank-bailout costs or reduce its deficit without outside help.
Goldman Sachs Chief European Economist Erik Nielsen said yesterday there’s a “big probability” that the country will be forced to turn to the EU for help unless markets “suddenly calm down.”
Irish bonds fell for an 11th day today, pushing the yield on the country’s debt to 8.08pc as of 3:19pm in London.
The spread over German bunds, Europe’s benchmark, widened to a record 554 basis points.
The premium has more than doubled in the past three months on investor worry that the Government won’t be able to reduce its deficit or cover the cost of bank bailouts without outside help.
The Government last week reiterated that it aims to push the budget deficit below the EU limit of 3pc of gross domestic product by 2014 from about 12pc of GDP this year.
When the costs of the banking rescue are included, this year’s deficit jumps to 32pc of GDP. Rehn said yesterday that the Government has not requested any financial support.
He said today that “market discipline” can come too late to prevent crises and called on euro-region governments to commit to “prudent fiscal policy making.”
“Unfortunately, market discipline alone is not very effective, and can come at very high costs,” he said.
“Markets typically have not restrained excessive borrowing by the governments or the private sectors until it has been too late. And when the markets have reacted, the reaction may have been excessive.”