Friday 9 December 2016

EU concession still long way from facing reality

Interest rate cut only means the inevitable default will be smaller than expected, says Colm McCarthy

Published 31/07/2011 | 05:00

FACE THE MUSIC: Taoiseach Enda Kenny, pictured in Achill Island last week at the opening of the Great Western Greenway, should bring forward the budget to October in a bid to bring down
the budget deficit and restore market credibility. Photo: Michael McLaughlin
FACE THE MUSIC: Taoiseach Enda Kenny, pictured in Achill Island last week at the opening of the Great Western Greenway, should bring forward the budget to October in a bid to bring down the budget deficit and restore market credibility. Photo: Michael McLaughlin

As ministers head for the beaches after the close of the new Government's first parliamentary session, there should be no self-congratulation or talk of corners being turned.

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The reduced interest rate and extended loan repayment dates offered by the EU at the Brussels summit on July 21 may represent the first break to have come Ireland's way since the resort to financial rescue in October of 2010. But the overall value of these measures is minor and the situation has changed from impossible to somewhere between hopeless and desperate.

The likelihood is that Ireland will not be able to borrow in the markets for the foreseeable future, without further and more substantial modifications to the existing arrangements with Europe. The Brussels deal has brought a small improvement in the market rate of interest on Ireland's sovereign debt, but this means only that the default will be smaller than previously expected, not that the risk of default has been removed.

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