The bailout exit abroad: What foreign media are saying

Views from Bloomberg, Guardian, Economist, FT, NYT and Sunday Times

Minister for Finance Michael Noonan at a press conference as part of day-long briefings to mark the exit from the Republic’s financial bailout. Photograph: Brian Lawless/PA Wire

Minister for Finance Michael Noonan at a press conference as part of day-long briefings to mark the exit from the Republic’s financial bailout. Photograph: Brian Lawless/PA Wire

Mon, Dec 16, 2013, 11:22

News agency Bloomberg’s take on Ireland’s exit from the bailout:

“Irish Finance Minister Michael Noonan didn’t celebrate with champagne as the nation exited its bailout. Investors are also keeping the bottles on ice.

Ireland yesterday became the first country to leave an aid program and fully return to sovereign debt markets since the euro-region’s crisis began in 2009.

“Noonan chose to do so without the safety net of a precautionary credit line or access to the European Central Bank’s bond buying program. “In the absence of our preferred option of a precautionary program, bond markets will closely scrutinize the decisions of Irish policymakers in the years ahead,” said Dermot O’Leary and Juliet Tennent, economists at Goodbody Stockbrokers in Dublin.

“Irish bond yields have plunged over the last two years, amid signs the economy is recovering and reassurances from the ECB that it would keep the euro region together. Yet government debt is the fourth-highest in the euro region, one in four mortgages by value is in arrears or have been restructured and economic growth is struggling to gain momentum.”

Henry McDonald writes in the Guardian:

“The Republic received more than €67 billion (£56.5 billion) from the IMF and the EU to rescue the state from bankruptcy after the Celtic Tiger economy collapsed. In return the country had to endure cuts of billions of euros to social welfare, public sector wages and pensions, and the scrapping of many capital spending projects.

“Under the programme the coallition government has to raise an extra €5.3 billion in taxes and reduce public spending by €9.6 billion.

“With Ireland becoming the first euro zone country to exit the bailout programme, Kenny is expected to acknowledge the sacrifices that the Irish people have made over the past three years.

“Over the weekend his ministers have been lining up to depict the Irish people as the ‘heroes and heroines’ of the crisis.

“Kenny’s finance minister, Michael Noonan, has warned that there is still a ‘tough road ahead’ for the Republic despite the exit from the bailout.

“Noonan said, however, that leaving the programme would create ‘a change in perspective’ towards Ireland around the world, particularly in the international money markets. He also predicted that the next estimate of Ireland’s standing by ratings agency Moody’s next month would be more favourable.

“Before the banking crash of 2008, Ireland had near full employment but was gorging on credit and fuelling in turn a massively overheated property boom. By the time the IMF and EU came into Ireland to bail the nation out, unemployment had soared to 15 per cent.”

Read the entire piece here: http://iti.ms/1bJzxcb

From Dead Cat Bounce blog by ‘CR’ at the Economist:

“From an initial glance, it may seem that the ‘luck of the Irish’ has returned. But first impressions can often be deceiving: Ireland is almost as far away as ever from a clean bill of economic health.

“As we noted in an article last week, clearing up its banks ‘will weigh heavily on the rest of the rest of Ireland’s economy­ - and on its politics - for years to come’.

“In the course of the bailing out of its banks, its national debt surged from just 25 per cent of to GDP to over 123 per cent. Some forecasts still predict it may rise to as much as 140 per cent before stabilising. And after rejecting the possibility of a €10 billion credit line in November, Ireland will still need to find the money itself to fund a forecast deficit of 7.3 per cent of GDP this year, the third highest in the euro zone after places like Greece and Spain.

“At the moment, Ireland’s situation is still perilous. It still has a yawning deficit and its property market is still over 50 per cent down from its peak. Only mass emigration over the last five years has stopped its unemployment figures from rising over 20 per cent; continued unemployment declines this year appear to be caused more by a surge in youth emigration than a return to economic health.

“Emigration seems almost a government policy to reduce unemployment figures. Billboard posters plastered around Ireland encourage young people to apply for visas to emigrate to America, and in Dublin’s main shopping district several emigration ‘shops’ have appeared to help people find work and fill out the paperwork to leave the country.

“Ireland’s welfare authorities have even started to send letters to the unemployed, telling them to leave the country to find work.

“But Ireland’s position would have been much worse were not for assistance from the European Union and its neighbours. For example, Ireland would now be in much more debt if Ulster Bank, its third largest lender, had not been bailed out by the British taxpayer through the support they gave to Royal Bank of Scotland. ”

Read the entire piece here: http://iti.ms/1bJzPQb

Sharlene Goff writes in the Financial Times:

“Ireland’s troubled banks, which plunged the country into crisis three years ago, still pose a significant threat to the broader economic recovery, even as the nation emerges from its punitive bailout.

“Although Ireland has spent €64 billion cleaning up its broken banking system, its two biggest lenders – Bank of Ireland and Allied Irish Banks – are still battling to convince regulators of their return to financial health.

“While analysts say the two banks have made significant progress in rebuilding their battered balance sheets since they were rescued in November 2010, both are expected to be lossmaking again this year, loading more pressure on to their already precarious capital positions.

“With a potentially brutal round of stress tests scheduled for 2014, Ireland’s attempts to position itself as Europe’s bailout success story cannot mask the challenges still faced by the country’s banks.”

Read the entire piece here: http://iti.ms/1bSZfzc

Liz Alderman writes in the New York Times:

“The Irish government’s severe austerity program was a condition of the €67.5 billion, or $92.9 billion, lifeline it received amid a severe banking crisis. But in part because of the sharp cutbacks, Ireland has regained the confidence of investors and will no longer need to rely on the international loans. It can now borrow money in financial markets at low interest rates. But it still must repay most of the loans it has received, which could take decades.

“While it has been painful for Ireland’s citizens, it is an achievement European leaders are hailing as a sign that Europe is moving past the worst of a five-year crisis. And with Greece, Portugal and Cyprus still struggling to exit their multibillion-euro bailouts, Ireland is being held up as nothing less than a symbol for recovery.

“International investors have been impressed with Ireland’s ability to improve its finances: the interest on its 10-year bond has been reduced to 3.5 per cent from 14.5 per cent. Newspaper headlines announce hundreds of new jobs weekly, especially in technology. A small revival is even blooming in construction, which imploded when the Celtic Tiger economy went bust.

“But the rigour required to get there has been painful. The government cut 30 billion euros in spending, or nearly 20 per cent of gross domestic product, one of the largest austerity programmes anywhere. New taxes were introduced. Salaries for public employees were cut by around 20 percent, and reductions in unemployment and welfare benefits followed. The bill to bail out Ireland’s banks has amounted to nearly €10,000 per Irish citizen.”

Read the entire piece here: http://iti.ms/1bSZL0k

Constantin Gurdgiev writes in the Sunday Times online:

“Today is Ireland’s bailout liberation day. Spain too is exiting its bailout and, like Ireland, is doing so without a credit line. It has something else in common with Ireland - both countries, according to the official statistics, are out of recession. Portugal is also out of official recession and due to exit its bailout in mid-2014. Greece and Cyprus, however, are marooned at the bottom of Depression Canyon.

“At it departed the scene, the troika gave Ireland a pat on the head, congratulating us for not rocking the boat. The Government at various times talked tough but the only troika measures it actually resisted were those reforms that threatened powerful domestic interests.

“On this weekend of celebratory speeches and toasts, two matters bear consideration. The first one is the road travelled. The second is the road ahead. Both will shape the risks we are likely to face.”

Read the entire piece here: http://iti.ms/1bJA7Xg