Wednesday 13 December 2017

Brendan Keenan: A delicate balancing act that could pay off in the long run

Chancellor Angela Merkel and Taoiseach Enda Kenny. Kenny has avoided the headache of getting a 'backstop' past Merkel's government.
Chancellor Angela Merkel and Taoiseach Enda Kenny. Kenny has avoided the headache of getting a 'backstop' past Merkel's government.

YOU don't expect your house to burn down but most people take out insurance, just in case. The Government assures us that it does not expect to crash and burn when the country returns to borrowing in the commercial markets next year. It is so confident that it has decided not to take out insurance.

The "insurance" would have been permission to borrow up to €10bn if things did go wrong in the bond market and the Government, as in 2010, could not borrow at affordable rates. At first glance, it looks like taking a big risk to make a "clean" re-entry to the markets without the protection of such a backstop.

Many eminent people think so, not least the Irish Fiscal Advisory Council, set up under European rules to think about exactly this kind of thing. It is also unusual, as the former deputy director of the IMF, Donal Donovan, has pointed out.

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