Friday 15 December 2017

Good news, but no farewell to troika yet

If it were just a question of being able to borrow on the markets, Ireland could exit the bailout today.

The €5bn raised yesterday means we have already secured 75pc of the entire year's borrowing target.

The absence of a 10-year bond in Ireland's debt profile was the last, glaring, evidence that there is anything abnormal in our national debt profile.

Add in cash already sitting in State coffers and we already have enough money set aside to last until the end of 2014.

As a country, we have no need for any new rescue loans from the EU or from the IMF, now, or for the foreseeable future.

The low price paid to borrow yesterday, which was driven down thanks to the strength of investor appetite, means that any money we choose to borrow is available at a reasonable price on the markets.

It's a huge turnaround in two and a half years, but it doesn't mean we can wave goodbye to the EU and IMF just yet.

The legacy of the bailout, including intense surveillance of our financial affairs by the troika, will continue until we have fully repaid our debts to them.

There is also still unfinished business with the banks, where the Government is pushing for Europe to share in the costs of bailing out bust lenders, and where risks of losses remain as long as the mortgage situation continues to deteriorate.

The economy at home is still worryingly fragile, and unemployment is extremely high.

Still, the successful deal is a vindication of the approach taken by the NTMA chief John Corrigan and Oliver Whelan, who actually handles relations with investors.

The bond market can be a daunting place because it is so public.

A failed auction or cancelled deal is not just humiliating, it can have a devastating effect on investor confidence.

The NTMA, by under-promising and over-delivering to investors has gradually won back the market support that erupted in yesterday's surge in demand for our bonds.

They were helped enormously by factors beyond our control.

The replacement of ECB President Jean Claude Trichet with the pragmatic Mario Draghi has been a game-changer.

Mr Draghi's promise to do whatever it takes to save the euro drove down borrowing costs for everyone – putting a fair wind behind Ireland as it came to borrow.

But Mr Draghi's key promise is to help those who help themselves.

He's said ECB support is there for any country that needs it, if they can show they already have some support in the markets.

Irish Independent

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