Ireland won't be tested too severely, says Buiter
Economists at home and abroad remain confident Ireland won't be locked out of European bond markets despite the growing eurozone debt crisis.
One of Europe's best known economists, Willem Buiter of Citi, said yesterday he didn't expect Ireland to be "tested too severely'' by the markets, despite rising Irish bond yields.
"Barring a sudden and implausible implosion of the collective common sense displayed in the past year, Ireland is unlikely to be tested too severely by the markets,'' said Mr Buiter. This was in contrast to comments this week by Kenneth Rogoff, the US economist and author, who said Ireland was "conspicuously'' vulnerable to a sovereign debt crisis.
Mr Buiter said bond markets were impressed by recent budgets introduced by the Irish Government. "Ireland appears to have bitten the bullet by agreeing on fiscal tightening worth seven to 8pc of GDP, including significant cuts in public sector salaries and pensions. It also has a real economy that is much more flexible than that of the other members,'' he said.
At home, Rossa White, chief economist of Davy, said he didn't expect the currently high bond yields to remain at these levels. "There is no reason for 10-year money to be that high, we are just being hit by general contagion,'' he said. He added that retail sales, PMI indicators, industrial production, exports and car sales all pointed to an end to the recession which began in late 2007.
Brian Devine, an economist with NCB, said the higher spreads were clearly not welcome. "But seeing as Ireland has no major redemptions or amounts to issue over the next couple of months, the situation is not a major concern at this stage, assuming the Greek bailout plans are clarified sometime soon,'' he added.