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'Unexpected developments' in Greece are the biggest risk to Ireland's recovery

The warnings come as a Greek debt deadline looms ever closer.

Greek Prime Minister Alexis Tsipras
Greek Prime Minister Alexis Tsipras
Image: AP Photo/Virginia Mayo

ONE OF GREECE’S main creditors has flagged “unexpected developments” in the country as being the biggest danger to Ireland’s economic recovery.

Leaders from the cash-strapped Mediterranean nation have been locked in talks today to unlock another tranche of bailout money as the prospect of it defaulting on its debts looms closer.

In its “post-programme monitoring” update on Ireland, the IMF said the situation in Greece was “the most prominent flashpoint for broader financial market volatility” and the biggest “downside” risk to the Republic’s public finances.

Although Ireland has little direct exposure and the stability of its bond spreads over (German government bonds) suggests that markets do not anticipate significant contagion effects to Ireland, its highly open economy would be impacted by any potential adverse effects on European recovery,” the report said.

Ireland IMF IMG managing director Christine Lagarde and Taoiseach Enda Kenny Source: AP Photo/Peter Morrison

Deadline looming

Greece is due to make a €1.5 billion debt repayment to the IMF at the end of the month, but it is expected to miss the deadline if it can’t strike a deal to release the final cash from its €240 billion bailout.

This afternoon its economy minister claimed the country had reached a broad agreement with EU leaders about reforms it would introduce to unlock the money with a final solution possible this week.

The EU has earlier been warned to prepare for a “state of emergency” in the country if it’s left unable to pay its debts.

On Saturday, Greek Finance Minister Yanis Varoufakis said Irish people might “allow themselves a feeling of mild superiority” over Greece because they had “swallowed the bitter pill of austerity” and emerged, but that attitude was “unhelpful”.

Greece Bailout Greek Finance Minister Yanis Varoufakis Source: AP Photo/Yorgos Karahalis

Meanwhile, the Irish government has recently been in “high level” talks with the Central Bank and NTMA about how to deal with the likely event of Greece being kicked out of the eurozone in the case of a default.

The IMF said Irish authorities reported a “strong cash position” that would provide a buffer against any market shocks.

However a separate report from ratings agency Moody’s said “periphery” countries in the eurozone like Ireland, Italy and Spain were vulnerable in the case of a Greek exit from the currency union.

READ: Greek banks could be just days away from running out of money >

READ: Irish wages are still going down, down, down… >

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About the author:

Peter Bodkin  / Editor, Fora

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