Ireland will become the first of four eurozone bail-out countries (the others are Greece, Spain and Portugal) to complete its rescue programme at the end of this year. It has announced that when it exits the three-year assistance programme, it will do so without the safety net of a precautionary credit line – European money set aside that it could tap if it has trouble raising money in the markets.
What the commentators said
“Ireland is getting rid of the crutches,” said Ralph Atkins in the FT. And judging by the muted reaction to the announcement of the clean bail-out, “investors have decided it will run – not stumble”. Ten-year bond yields remain close to the record low they hit in May. You can see why the markets are relaxed about this, said Richard Barley in The Wall Street Journal. Unlike its struggling peripheral counterparts, Ireland has passed its official rescue package reviews “with distinction”. Annual budget deficits are falling. The economy has returned to growth and prospects for the crucial export sector look “decent”, given the relatively robust shape of Ireland’s two biggest trading partners, Britain and America. Even the domestic economy, devastated by the banking crisis, is looking up. Unemployment has slid from a peak of 15.1% to 13.2%, and house prices have ticked up.
And of course it helps, added Karl Whelan on Forbes.com, that Ireland has already managed to raise €21bn from the markets, which covers its borrowing needs for 2014. But it’s still “not out of the danger zone”, said Deutsche Bank. Market interest rates could rise, raising Ireland’s future borrowing costs, if it emerges that banks, which bankrupted the state, still don’t have enough capital: stress tests are due soon and the number of home loans in arrears has been rising. And given the massive debt load still weighing down the domestic economy, it’s not clear that consumption and investment can add much to the export boost. With “much still to prove”, it will be some time before Ireland exits “the orbit of this crisis”.