Wednesday 22 November 2017

Ireland may receive credit line from EU as it exits bailout - reports

Finance Minister Michael Noonan
Finance Minister Michael Noonan
Sarah McCabe

Sarah McCabe

Ireland may receive another line of credit from the EU to help its return to the financial markets, a leading Germany publication has reported.

Handelsblatt said that Eurozone finance ministers will decide by November whether to offer Ireland a precautionary line of credit under the European Stability Mechanism.

Citing European Commission sources, it said that Ireland will need a "safety net" if it is to return to the financial markets from January 2014.

Calling the line of credit “another loan”, Handelsblatt said it will be a stand-by measure only to be used in emergencies.

The newspaper also reported that a second aid package for Portugal is being discussed. Portugal’s current programme is due to expire mid-2014.

It has been widely expected that support from Europe would come as we emerge from bailout with negotiations being headed up by Finance Minister Michael Noonan.

Ireland has already dipped its toes in the bond markets and borrowing costs have fallen dramatically recently.

Meanwhile, stockbroker Cantor Fitzgerald said this morning that it predicts Irish GDP will grow by 1.8pc in 2014, significantly below the 2.4pc growth forecast given by the government.

The company cited a shortage of credit as one of the main reasons for this. It said the government needs to promote the demand for and availability of credit.

“Direct bank and non-bank finance initiatives are needed to accelerate consumer confidence and foster increased demand for investment finance. The Government could engender confidence by both articulating its long-term debt/GDP target and by outlining a clear timeline to the end of austerity.”

However, the financial advisory firm also noted that Ireland is on target to become the first bailed-out nation to exit a bailout programme, which it expects will be facilitated by the European Central Bank’s bond-buying programme known as outright monetary purchases and the European Financial Stability Fund through a line of credit.

It said it does not expect that European funds will be used to compensate the government for legacy bank debt. However, “it is hopeful that Irish banks may avail of a guarantee for the ESM to securitize their tracker-mortgage books. This would significantly improve the viability of the Irish banks and remove a substantial overhang for the Irish Exchequer.”

It also predicted that Moody’s will upgrade Ireland’s sovereign rating in the first months of next year. “Cantor Fitzgerald expects Moody’s, the only large rating company retaining a non-investment rating on Irish debt, to upgrade its rating following a planned stress test of Irish and other European banks in the first quarter of 2014.”

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