The international press were in agreement that yesterday’s economic figures were disappointing for the country, giving further fuel to investor concerns over Ireland’s financial health.
Ireland's economic difficulties made the front page of the Wall Street Journal's European edition this morning, with the paper saying the news of the economic contraction "startling" investors.
It speculates that the Government may have to introduce tougher budget measures to trim the budget deficit, and says in recent weeks investors have begun to fear a Greek-style bailout could be on the cards for Ireland. It notes that this is unlikely to happen at present, because Ireland has funded its budget through to the middle of next year.
The paper also throws the spotlight on to austerity measures and their success – or lack thereof. It raises doubts about the wisdom of taking cash out of the economy and hampering consumers.
It quotes a Glasgow based portfolio manager Stuart Thomson as saying the austerity measures will, in fact, hurt the economy and economic reality “is going to rear up and bite the politicians”.
This is partly echoed by the Daily Telegraph, which says yesterday's data could renew concerns that austerity measures are not without other relief "risks tipping the economy into a self-reinforcing spiral".
It notes that although the State was praised for “grasping the nettle” early and implementing cuts, any reward for its “good behaviour” has yet to come.
The Guardian says that Irish figures are "a stark warning" to governments across Europe including Britain's own. It was being used by Labour as a warning of "austerity overkill".
Today's New York Times describes yesterday's data as a "setback" for the "ailing" economy. The markets saw the figure as a sign that the economy is heading for a "double-dip" recession, the paper said, and shows how hard it will be for governments in countries such as Greece, Portugal and Spain to stimulate recovery in their economies.
The paper notes that weak growth will be a problem for the State’s attempts to reduce the budget deficit, with the economy “desperately” needing a pickup to generate tax revenue.
Meanwhile, the Financial Times relegates the report to the markets and investment pages but seems equally stern, noting that the cost of insuring the country's bonds against default rose to a record, with a sharp sell-off in the bonds that interest rate premiums to increase. Analysts said there were worries that the Government had "bitten off more than it could chew" with the bank bailout.
On the back page of the FT, a market report says Ireland's credit outlook took a turn for the worse, with fears for the country's financial situation compounding disappointing economic releases from the US and Europe. Analyst Natascha Gewaltig said the disappointing growth figures only added to prevailing risk aversion.
German publication the Süddeutsche Zeitung says not all of Ireland's problems are of its own making, with subsidies masking issues like the rapid growth in Dublin's economy and slower growth in rural areas. It says the Celtic Tiger had been "reeling with a dangerous virus" - growth at any price – for some time and the financial crisis finished the country off.
