Irish bailout speculation 'not helpful'

Tue, Jan 10, 2012, 00:00

A European Commission spokesman has described speculation that Ireland may require a second bailout as "not particularly helpful".

The spokesman for EU economics commissioner Olli Rehn was responding to a question about comments by Citigroup chief economist Willem Buiter who said yesterday that Ireland should consider a second stand-by bailout programme in advance of a last-minute application.

"What is important and essential in the case of Ireland is to ensure the continuation of the good job done by the Irish authorities in the full implementation of the programme," said the commissioner's spokesman at the daily media briefing in Brussels.

It was not useful to speculate about a second bailout when the first programme was delivering, he said.

During a visit to Dublin yesterday, Mr Buiter said Ireland clearly needs further financial assistance on “non-market terms said during a visit to Dublin.

The former member of the monetary policy committee of the Bank of England said the most attractive option from Ireland’s point of view would be a reduction on the interest it pays on an outstanding €30 billion in promissory notes, issued mostly to deal with the collapse of Anglo Irish Bank.

He said Ireland is paying in the region of 6 per cent on this money but it could be refinanced at 3 per cent by the European Financial Stability Facility. This would have a material effect on Ireland’s ability to deal with its debt burden.

It would have attractions for the rest of Europe as it would not be a technical restructuring of sovereign debt. It would also have the political advantage of showing recognition for the enormous effort Ireland has made, he said.

There were two other possible options if that was not enough, he said during a press briefing. These were a restructuring of Irish sovereign debt or the revoking of the Government guarantee on bank debt.

He said he thought European politicians and the members of the troika would prefer to pursue the option of more generous official funding terms. Mr Buiter said Ireland was not like Greece but it was in very bad fiscal shape because of its bank guarantee. He said clearly something had to be done about the “continuing massive sovereign funding gap” that Ireland had after 3½ years of “fierce” fiscal austerity.

Mr Buiter was in Dublin for a Citigroup Global Research Day conference.