THE GOVERNMENT has a good chance of being able to borrow in the international markets again if European leaders take measures to stop the euro zone debt crisis spreading, according to the International Monetary Fund official overseeing Ireland’s bailout.
IMF deputy director Ajai Chopra said the State had met all its targets under the bailout programme. He recommended that EU leaders promptly implement further measures to stem the crisis across the 17-country euro area.
In their third quarterly review of Ireland’s bailout, the so-called “troika” of the IMF, the European Commission and the European Central Bank said Ireland was “on track” and “well financed”.
Mr Chopra said it was important to abstract the risk of contagion when considering Ireland’s efforts to fix the economy.
“The country needs to be judged by its own merits,” he said.
Ireland’s borrowing costs would be lower and there would be “good prospects” of returning to the bonds markets if it weren’t for spreading euro zone crisis, he said.
“The problems that Ireland faces are not just an Irish problem,” said Mr Chopra.
“They’re a shared European problem. What we need and what’s lacking so far is a European solution to a European problem.
“What’s critical now is for Europe to dispel the uncertainty that’s being created by the lack of what’s perceived by markets as an insufficient response to decisively handle this crisis by implementing consistent, cohesive and co-operative policies.”
Mr Chopra had previously said the EU/IMF bailout was an Irish solution to an Irish problem.
Earlier, Minister for Finance Michael Noonan said Ireland was funded to 2013 but had “a very heavy repayment date” in January 2014 when the State had to repay up to “€12 billion in debt”.
European Commission director Istvan Szekely said Ireland was “best positioned” to benefit from any EU measures introduced for Greece such as extending the dates for the repayment of debt or the buy-back of Greek debt.
“Once they are created we will look at what fits best Ireland’s needs,” said Mr Szekely.
European Central Bank official Klaus Masuch, however, ruled out any Irish debt restructuring.
“Any discussion about sovereign debt restructuring is neither needed nor would it be helpful. I think Ireland’s debt is sustainable and remains sustainable,” he said.
Mr Chopra said there needed to be “closure” around whether private investors would be forced to cover euro zone bailout costs.
The decision of ratings agency Moody’s to downgrade Ireland to “junk” was “directly linked” to a change in euro area policy on the prospect of forcing private investors to share the cost of future state bailouts. “The downgrade is largely a reflection of events outside of Ireland.”
Ratings agencies had “got it wrong on the upside during boom times by underestimating risks and it’s entirely possible that they are also getting it wrong on the downside by overestimating the risks”.
Mr Chopra suggested the troika’s review in mid-October would be tougher but would not say whether there should be more spending cuts than tax increases in the December budget.
Mr Szekely said each review was challenging. “The task ahead of us is huge,” he said.
Mr Masuch said the ECB was still opposed to the Government’s plan to force losses on senior unsecured and unguaranteed bondholders in Anglo Irish Bank and Irish Nationwide Building Society.
Such a move was “very risky”, he said. The ECB was supporting the Irish banks with loans of about €150 billion and the banking sector had profited from the ECB’s liquidity measures more than in any other country, he added.
