Saturday 21 April 2018

Drop in Irish borrowing costs recorded

Irish borrowing costs eased back today following assurances from key figures in the European Union that investors would be repaid if Ireland tapped into a rescue fund.

Irish 10-year bond yields - the interest rates that investors demand to hold the debts, a reflection of risk of default - sunk to 8.1pc from their peak of 8.9pc on Friday morning.

The drop in yield came after Vitor Constancio, the European Central Bank vice president, said today that the European Financial Stability Facility would be adequate to help the Government prop up its economy in the same way it had helped Greece.

On Friday, the finance ministers of the five biggest nations in the European Union (EU) issued a release reassuring bond holders that they would be repaid if Ireland chose to ask for a bail-out.

Investec economist Philip Shaw said: "The statements reassured investors and introduced a degree of optimism back into the market."

Irish bond yields are still much higher than German 10-year bond yields, which are typically about 2.5pc.

This reflects the level of debt in the economy, which is running a deficit of 32pc after a costly bail-out of the banks.

However, there are no signs yet that the Government wants a bail-out.

It does not need to re-finance its loans until mid-July and the Government is loathe to have policies, such as higher rates of corporation tax, forced on it by the rest of Europe.

TDs have repeatedly denied rumours that they have been involved with talks to ask for a bail-out.

Concerns over the Irish economy centre around the mammoth bank bailout - the world's costliest when measured per capita - with some worried it will overwhelm the country's finances and force the Government to seek a financial rescue from eurozone partners.

It could be forced to follow in the footsteps of Greece, which was saved from imminent default on its loans in May when it received a €110bn rescue loan from the other 15 eurozone nations and the IMF.

Debt-ridden Greece is even further in the red than most people thought, experts warned today.

Greece's 2009 budget deficit reached 15.4pc of gross domestic product (GDP), significantly above its previous estimate of a 13.6pc deficit, Eurostat said.

Its 2009 budget deficit and debt levels were much higher than previously estimated, the EU statistics agency said, making it unlikely the country will reach targets set out in its bailout agreement.

Public debt stood at 126.8pc of GDP at the end of last year, higher than that of any other EU state. In April, Eurostat had estimated the figure at 115.1pc of GDP.

Press Association

Business Newsletter

Read the leading stories from the world of Business.

Also in Business