Published: 18 Nov 2010
Last Updated: 19 Aug 2013
An Irish bailout appears to be increasingly imminent: central bank chief Patrick Honohan seemed to confirm on Irish TV this morning that a substantial chunk of EU/ IMF change (to the tune of 'tens of billions' of euros) will soon be on its way to Dublin. Although it's been pretty obvious which way the wind was blowing for a while now, this is significant because it's the first time a senior Irish official has publicly accepted the inevitable. As an EU and IMF member, Britain will almost certainly have to stump up some of this cash - and as the latest grisly public borrowing figures remind us, we can barely afford our own bills at the moment, let alone anyone else's...
Ireland has previously argued that it doesn't need and doesn't want a bailout loan, largely because of the stigma and strings attached. But with its senior EU partners keen for it to take the money, and no sign of confidence recovering (there are more stories today about alarming outflows from its beleaguered banks), it's hard to see any other option. Particularly now there’s a team of negotiators from the EU and the IMF in Dublin, with calculators in hand, it's always looked to be case of when, not if. Until investors see the EU's full financial weight behind Ireland's huge debts, why would they stop worrying about it defaulting?
As the central bank governor, Honohan doesn't actually get to decide whether or not Ireland takes the cash; that's the Government's call. But he's clearly an influential voice, and one that its under-fire politicians will find it hard to ignore. Hence the significance of his appearance on RTE this morning, where he said it was his 'expectation that [the loan] is definitely likely to happen', and that it would be worth 'tens of billions'. It would have to be a large sum, he said, because 'the purpose of the amount to be advanced is to show Ireland has sufficient fire power to deal with any concerns of the markets'. Sounds like a pretty done deal to us.
No word yet on what the loan will look like, exactly, or who will have to stump up what. But it looks pretty likely that the UK Government will provide at least some of it. Arguably that's eminently sensible, as we wrote yesterday. But it's going to involve spending/ loaning yet more money we don't really have. Figures released today by the Office for National Statistics show that the Government borrowed £10.3bn in October to plug the gap in the public finances - a new record. On the plus side, we're still on track to meet the Office for Budget Responsibility's forecast of £149bn for the full financial year - but a big payout to Ireland might presumably scupper that...
Ireland has previously argued that it doesn't need and doesn't want a bailout loan, largely because of the stigma and strings attached. But with its senior EU partners keen for it to take the money, and no sign of confidence recovering (there are more stories today about alarming outflows from its beleaguered banks), it's hard to see any other option. Particularly now there’s a team of negotiators from the EU and the IMF in Dublin, with calculators in hand, it's always looked to be case of when, not if. Until investors see the EU's full financial weight behind Ireland's huge debts, why would they stop worrying about it defaulting?
As the central bank governor, Honohan doesn't actually get to decide whether or not Ireland takes the cash; that's the Government's call. But he's clearly an influential voice, and one that its under-fire politicians will find it hard to ignore. Hence the significance of his appearance on RTE this morning, where he said it was his 'expectation that [the loan] is definitely likely to happen', and that it would be worth 'tens of billions'. It would have to be a large sum, he said, because 'the purpose of the amount to be advanced is to show Ireland has sufficient fire power to deal with any concerns of the markets'. Sounds like a pretty done deal to us.
No word yet on what the loan will look like, exactly, or who will have to stump up what. But it looks pretty likely that the UK Government will provide at least some of it. Arguably that's eminently sensible, as we wrote yesterday. But it's going to involve spending/ loaning yet more money we don't really have. Figures released today by the Office for National Statistics show that the Government borrowed £10.3bn in October to plug the gap in the public finances - a new record. On the plus side, we're still on track to meet the Office for Budget Responsibility's forecast of £149bn for the full financial year - but a big payout to Ireland might presumably scupper that...
