Ireland not at risk of fallout from fiscal crisis, says Lenihan

 

IRELAND IS not at risk from the fallout of the Greek debt crisis and any potential future hit would be as part of European-wide risk, Minister for Finance Minister Brian Lenihan said yesterday.

Mr Lenihan said Ireland did not have the severe structural problems that some Mediterranean countries have and the country would have a “measurable” return to growth in the last quarter of this year.

Ireland, widely considered the euro zone’s weakest link a year ago after the abrupt slide from boom hit public finances, has been under less pressure since tough spending cuts and bank reforms were introduced.

The State’s fiscal reforms have been hailed by European leaders as an example for fellow euro-zone struggler Greece. “If real risks materialised in relation to Ireland, they would be paralleled in a European-wide crisis in the financial system and we’re not at that point,” Mr Lenihan said.

“The risk of contagion in my view does not extend to Ireland. Over the last 18 months we have taken many of the measures that the Greeks are only beginning to take. I don’t see Ireland as being at great risk.”

A proposed €110 billion aid package for debt-stricken Greece has failed to soothe concerns that the fiscal problems saddling it, and perceived weaker euro-zone nations, will hurt the banking system and worldwide economic growth. “One of the reasons markets are critical of countries other than Greece is because some . . . don’t just have public debt problems, they also have structural problems with their economies,” Mr Lenihan said. “We’re not a country that has the severe structural problems that some of the other Mediterranean countries have shown and the markets have tended to differentiate Ireland out from these countries.”

Just as the State steadily won back market confidence last year, so could Greece, Mr Lenihan said.

“I think the markets are waiting to see the response of the Greek government and the credibility of the Greek measures,” he said. “I believe when the Greek government take the measures required under the stability package, Greece will acquire greater credibility.”

Mr Lenihan said a decision on whether Ireland would skip a May bond auction because of rising funding costs had yet to be made, adding that Ireland was comfortably funded until early next year.

He did not see the country having to seek help from the International Monetary Fund should market funding rates remain high.

The three major rating agencies said last week that the State’s responsible approach to managing its finances means its rating prospects have not been harmed by recent speculation against peripheral euro-zone countries.

Mr Lenihan added that the bulk of the adjustment needed in December’s budget for 2011 would be found through cuts in expenditure. – (Reuters)