Spread on Irish debt a 'poor reward'
Irish Central Bank governor Patrick Honohan said the current spread on long-term Irish sovereign debt is a "poor reward" for the nation's efforts to narrow the fiscal deficit.
"Irish Sovereign spreads may no longer be bloated by redenomination risk, but at 300 basis points at the long-end, they do seem to reflect a credit risk premium that is poor reward, so far, for what has been a sizable fiscal adjustment effort," Mr Honohan said.
"The Irish financial situation is relatively extreme, and as such illustrates clearly some of the key problems that have been faced also in other stressed parts of the euro area.''
''The pernicious feedback loop from banks to sovereign and from sovereign to banks that re-emerged in the crisis remains strong and damaging,'' Mr Honohan said.
He said the ECB's new bond-purchase program provides the tools needed to buttress the bank's determination to keep the euro alive.
''The OMT can be expected to have an influence transmitted by market forces throughout the yield curve, '' he said.
''Still, it is not to be expected that the OMT will by itself restore the tight uniformity of spreads that prevailed for the first decade of the euro.