'Clear and present danger' of Ireland going same route as Greece

THE CHANCES of Ireland going bankrupt now stand at about 25 per cent as opposed to 15 per cent a year ago, the Oireachtas Committee on European Affairs has heard.

Dan O’Brien, senior Europe editor and economist with the Economist Intelligence Unit, told the committee there was a “clear and present danger” of a number of countries, including Ireland, following the same route as Greece.

“It’s a ballpark figure of about 25 per cent of this country not being able to borrow,” Mr OBrien told the committee.

He said that, after a “completely inadequate” initial response, last December’s Budget had been a proportional response to Ireland’s economic crisis meaning the State had regained some credibility internationally.

However, he said that international conditions had now rendered Ireland vulnerable.

He said Ireland was considered to be at the same risk level as the likes of Portugal for a number of reasons:

* Ireland’s deficit was the highest among the 27 EU countries;

* the “gargantuan” nature of the banking crisis here;

* a loss of credibility which had not yet been fully regained.

However, he said that, had Ireland not joined the euro, we could have gone down the same route as Iceland. “Certainly, up to this point, being in the euro has been a stabilising factor,” he said.

In more general terms, Mr O’Brien said there were five encouraging factors when it came to European economic recovery. These were: that the non-financial economy was recovering; the agreement to a €750 billion rescue package by the EU; extreme financial tightening in countries like Ireland and Latvia; political stability across the EU, and support across the German political establishment in supporting measures such as the Greek bailout.

However, reasons for concern remained, including the “extreme fragility” of the financial system, the worry that the Chinese financial bubble could burst and the legitimacy of the euro in the longer term.

Mr O’Brien added that he did not believe that Germany would leave the euro given the huge costs which such a move would incur.