Cowen calls for calm

TAOISEACH Brian Cowen last night moved to calm the international money markets.

In an exclusive interview with the Irish Independent, an upbeat Mr Cowen insisted the Government's Budget strategy was on track.

He said international investors had misinterpreted recent comments by German leader Angela Merkel, which had unwittingly driven the cost of Irish borrowing to record levels.

Soaring bond interest rates, which hit 9.26pc last night, are a sign of fears among international investors that Ireland won't be able to repay its debts.

And if those investors refuse to lend Ireland more money, the country will have to ask for a bailout from the EU.

The German chancellor spooked investors by suggesting that not all national debt should be covered if a country needs an EU bailout. The frenzy grew yesterday as French Finance Minister Christine Lagarde backed her position.

The Taoiseach believes that the German and French stance on the restructuring of debt caused unintended market reaction.

"It hasn't been helpful," he said, referring to Ms Merkel's intervention.

"What has been said there has had, I think, an unforeseen consequence, perhaps.

"I'm not suggesting that anything was said for the purposes of causing further difficulty" he said.

However, "the consequence that the market has taken from it is to question the commitment to the repayment of debt."

Mr Cowen said the bond markets were "behaving irrationally" and that Irish interest rates had jumped by 1pc on Wednesday for no reason.

Finance Minister Brian Lenihan also said that the bond spreads were influenced by recent "unintended" comments by "senior German figures", which raised the possibility of sovereign defaults as part of future EU bailouts.

He said that the National Treasury Management Agency (NTMA) had advised him that the current volatility was caused "largely and exclusively by uncertainty about the future of European sovereign debt.

Former Taoiseach Garret