DESPITE REPEATED ASSURANCES from both the Taoiseach and the Minister for Finance, whispers about Ireland heading towards an EU bailout are not going away.
This afternoon, the BBC has reported that it is only a matter of time before Ireland receives help from the European Financial Stability Fund (EFSF), adding that the provisional estimate for EFSF loans is believed to lie between €60bn and €80bn.
After record-breaking surges in the price of Irish ten-year bonds over the last fortnight, the country enjoyed a slight respite on Friday. However, the battle to regain investor confidence remains a formidable one.
Taoiseach Brian Cowen firmly denied any suggestion that the government had moved to seek funds, saying “We have made no application whatever for funding”.
Similarly, minister for Finance Brian Lenihan insisted that the idea of applying for funding did not make “any sense”, adding “the state is well-funded into June of next year”.
The head of the Eurogroup of finance ministers, Jean-Claude Juncker, also said that Ireland had not applied for funding from the European Financial Stability Fund. Likewise, the International Monetary Fund chief Dominique Strauss-Kahn said today that he believes that “Ireland can manage well” and would not need an IMF bailout.
Nevertheless, BBC business correspondent Joe Lynam says that an EU bailout deal could come as early as next month for Ireland, writing:
Unlike Greece last May, Ireland doesn’t need to ask the markets for money until next year. But bond traders are not convinced it can cut its deficit by enough by then and have pushed the cost of borrowing to unsustainable levels (8.3%).
Dublin had hoped that by slashing spending and raising taxes in the forthcoming budget on 7 December, it would show resolve and in doing so drive down the cost of borrowing on the bond markets. That hope is now dashed.
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