Saturday 24 March 2018

Talk of new bailout is not ludicrous

The Government may be unwilling to admit it but such speculation is consistent with the facts, writes Colm McCarthy

AND then there were four. Only Germany, the Netherlands, Finland and Luxembourg of the 17 eurozone countries retain AAA ratings after Friday's unsurprising downgrade from Standard and Poor's. The borrowing of the EFSF stability fund, which lends to Ireland, is guaranteed by the solvent eurozone members including France and Austria, both downgraded on Friday. The interest rate the EFSF has to pay gets passed on to the borrowing countries. With lower credit-worthiness for the guarantors, the EFSF will have to pay more, which is bad news for Ireland.

There have been protracted negotiations for several months on a 'voluntary' haircut for holders of Greek sovereign bonds, and the other bad news on Friday was that these talks are going nowhere. There could be a Greek default within weeks. The European crisis management efforts remain firmly behind the pace of the game, where they have been rooted since the botched Greek bailout in May 2010. Friday's events provoked yet another pointless response from EU Commissioner Olli Rehn: it is the fault of the ratings agencies; they are being "inconsistent".

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