Our sea is still choppy but the ship is being steered at last
Fishermen will tell you that when weather, wind and currents are on the turn, a curious, choppy and deceptive water (it's called "an uncertain sea") is the result. Such a sight is worrying not only to a captain trying to chart his course, but also to his spirit.
We're on this sea at the moment. The economic wind seems to be blowing one way, while the optimistic language of politicians gusts another.
Most of us harbour doubts and worry about the future but we're hoping against hope that Finance Minister Brian Lenihan was right last week when he proclaimed that the "worst is over" for Ireland.
But no matter how well-groomed they appear on the day, Budgets often look pretty rough in the cold light of the following morning.
It was, therefore, heartening to see international investors giving a vote of confidence to last week's Budget with a surge of support for Irish government bonds.
This support meant the cost of insuring against a default on Irish debt actually fell, dropping by 0.1pc relative to key German bonds, which are regarded as the strongest in the eurozone.
As a result, Irish credit- default swap spreads finally moved in the opposite direction to those of Greece, which sent shockwaves through the market last week when it was severely downgraded.
A positive reaction from international investors was crucial to Ireland last week and, in its own way, it marked a turn of events for the economy. Overnight, the perception of Ireland had changed.
Foreign investors, who own most Irish bonds, had been getting increasingly concerned about our ability to repay debt in the wake of the problems in Dubai, a ratings downgrade for Greek bonds and continuing fears that some banks have not yet come to terms with the scale of their losses.
Beneath Mr Lenihan's unfounded optimism and bluster, there was a clear if unspoken assumption: this Budget includes a summary of what matters to keep the country afloat.
This made the international markets sit up and think; maybe, just maybe, the man finally has a plan.
Ireland is now seen an example of what Greece should be doing. But one vital consideration for bond markets is that we don't just produce a speedy solution but, more importantly, a credible one.
Like most business strategies, what's crucial now is that we show delivery against the plan. The size and nature of our budget deficit means further cuts will be needed in 2011 and 2012.
The policy changes the rating agencies are looking for are nowhere in sight.
Rating agency Moody's acknowledged that the measures the Irish Government took in the Budget were "impressive", but added that the "scale of the challenge is still considerable".
None of the rating agencies signalled that they would change their ratings for the country despite the impressive and vicious budget cuts.
In short, the outlook is still not brilliant.
While it's difficult to see how the worst is over -- considering that we still have to deal with our hapless banking sector -- we can take some comfort from the fact that last week Mr Lenihan realised you can't cross the sea merely by standing and staring at the water.
- Maeve Dineen
Irish Independent
