“IRELAND IS RUNNING OUT OF ROAD”, opens the Wall Street Journal’s Richard Barley, discussing the fallout from yesterday’s announcement that December’s Budget would include €4.5bn in spending cuts and €1.5bn in new taxes.
“The government has done everything the market could have expected to shore up both its banks and its own finances… But the bond market, the target audience for its efforts, seemingly doesn’t want to know. It has just four months to regain investor confidence,” writes.
Despite having already squeezed €15bn from the Budget since mid-2008, and being on course to have implemented two-thirds of its planned rationalisation, the Irish bond price refuses to fall, remaining well above 7.6%.
The Financial Times (subscription needed) describes the €6bn package as “twice as savage” as originally projected, with the “embattled” government desperate to convince the world’s investors of its ability to get the spending back on track.
The cuts would leave next year’s projected Budget deficit at between 9.25% and 9.5% of GDP, compared to 32% this year given the one-off price of the banking bailout.
It doesn’t get much better elsewhere – French-based news agency AFP says the cuts were necessary to tackle a “once-in-a-century” crisis in the “debt-ridden eurozone nation”.
The Guardian focusses on the cost of borrowing for Ireland, leading that the €6bn package is twice as big as that expected only a few months ago, with the government “struggling to control the country’s fiscal crisis”.
The growing price of 7.77% for 10-year bonds and 6% for insuring against a default were signs, it said, of “mounting scepticism the country was doing enough to keep Ireland out of the European rescue fund.”
The New York Times describes the budget as the latest attempt “to salvage its fiscal credibility” and was finding it increasingly difficult to persuade the world’s investors that the country was worth giving money to.
“Compounding investor uncertainty is the hard line that the government has been taking in pushing junior bondholders to take losses on their investments.”
At least, we suppose, there is some good news: Ireland’s new financial overlord, European economics commissioner Olli Rehn, has welcomed the scale of the cutbacks being proposed.
China’s Global Times reports that Rehn met the proposals as a “continued commitment to reducing the deficit to below three percent by 2014″ and would be an “important anchor for financial markets”.
The level of the cuts being proposed were “appropriate, as it would strike a balance between allowing the recovery to strengthen and addressing budgetary challenges in a timely and frontloaded fashion”.
At least there’s some comfort, given that the Budget is likely to see the average family €6,000 less off when it’s announced on December 7.
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