Second bailout a ‘ludicrous’ notion – Michael Noonan
FINANCE Minister Michael Noonan has dismissed talks of Ireland needing a second bailout adding that the country is fully funded up to the end of 2013.
"It's ludicrous to be talking about a second bailout," he said today ahead of the Dail resuming after the Christmas break.
He was responding to suggestions by Citigroup chief economist Willem Buiter that Ireland should negotiate a second standby bailout from the EU/IMF/ECB troika.
Mr Buiter, who is a former member of the Bank of England’s monetary policy committee, said it didn’t make “good business sense” to be borrowing at interest rates of 8pc when bailout loans come with a 3pc tag.
While Ireland is currently priced out of the open markets, if it returned to the bond market now the cost of borrowing would be around 8pc.
“We’re a year into the rescue programme which was negotiated by the previous government and we’re fully funded until the back end of 2013,” the Finance Minister added.
“So it’s really speculation by economists who at the start of the year speculate on these matters.”
Mr Noonan’s comments echo those of the European Commission which yesterday described Mr Buiter’s suggestion as “not particularly helpful.”
Ireland is planning to dip its toes in the bond market at the end of this year and to return to the market in 2013.
Meanwhile, it has emerged that the US Treasury department was concerned that the Irish bailout could be derailed by poor growth and the Government’s inability to spend.
Confidential documents released to RTE News by the US Government disclose that US Treasury Secretary Timothy Geithner used a meeting with Finance Minister Michael Noonan to assess domestic threats to the bailout.
Mr Geithner was acutely aware of the allegations that he had personally halted plans to burn Irish bank bond holders, according to the documents.
He had two separate meetings with Taoiseach Enda Kenny and Mr Noonan last year to assess the risks “both domestic and external” to the bailout.
His officials noted that the Fine Gael/Labour coalition had campaigned on promises to renegotiate the bailout.
Briefing notes record that officials were aware that the bailout success depends on export growth and they encouraged Mr Geithner to press Mr Noonan on how the Irish economy could grow when our main trading partners were also in recession.
They also noted that the size of the Government deficit meant that stimulus spending was not an option and that the euro has appreciated against the dollar and pound sterling.
They had questions on how the government planned to finance the banking system and the notes told Mr Geithner to expect questions from Mr Noonan about his contact with the IMF vetoing plans to burn the bondholders.
The documents also reveal that US Senators wrote to the Treasury Secretary over concerns that the US might be lending to a country that had behaved irresponsibly and that Ireland might default on its IMF loans, according to RTE News.
Mr Geithner told them that the US taxpayer had never lost a cent from an IMF loan and he was confident Ireland would repay the bailout in full.