IMF: High debt threat to eurozone members
The International Monetary Fund (IMF) says eurozone members with high debts face a borrowing squeeze once interest rates start to normalise.
The warning contrasts with Taoiseach Leo Varadkar's decision to scrap ambitious debt reduction targets and do away with a rainy day fund in order to boost spending.
Borrowing costs for the State have fallen to all-time lows on the back of the European Central Bank's (ECB) so-called quantitative easing (QE) programme, which floods bond markets with cash and drives down borrowing costs for all eurozone members. However, the IMF said the difference in interest costs for weak and strong eurozone members could widen when the ECB stops propping up the market.
"Some high-debt countries may face rising sovereign spreads when monetary policy accommodation is reduced," the IMF said.
The Irish Fiscal Advisory Council, an independent budget watchdog, said Ireland had a high level of government debt, equivalent to 2.4 times government income at the end of last year, compared with 0.4 times income before the crash.