THE INTERNATIONAL market’s attitude towards Irish debt will be tested tomorrow when Ireland seeks to raise at least one billion euro through the auction of four- and eight-year bonds.
Minister for Finance Brian Lenihan was in contact with British business journalists at the weekend seeking to counter rumours that the Government was close to seeking outside help.
He said a report last week by Barclays only raised the issue of seeking outside help in the context of unforeseen disimprovements in the State’s economic recovery scenario, or further unexpected losses in the banking sector.
Mr Lenihan said Ireland would not need any bailout from the International Monetary Fund and that a “definitive estimate” of the cost of dealing with Anglo Irish Bank would be available by the end of September.
Second quarter growth figures are due out from the Central Statistic Office later this week, but it is not expected that Mr Lenihan will travel to foreign capitals to speak about the position of Ireland’s finances until a final or more accurate estimate has emerged for the cost of dealing with Anglo.
New capitalisation estimates are due in the near future from the Financial Regulator, Matthew Elderfield, which would allow more accurate estimates to be made.
Mr Lenihan said the markets are punishing Ireland because it has been very honest about the position of its banks.
He said it was remarkable that GDP was on track to move to 1 per cent growth this year from an 8 per cent decline last year.
Last week the interest rate being sought for Irish debt increased to half a point higher than during Europe’s government debt crisis in early May. Friday’s rise was among the largest registered on a single day and brought the yield to 6.3 per cent.
Meanwhile, the head of employers’ group Ibec, Danny McCoy, has called on the Government to make clear how much it expects to take out of household budgets by way of increased taxation.
Mr McCoy said households were saving close to 10 per cent of their income as against 4 per cent during the boom years. Talk of the need to raise billions by way of tax hikes and spending cuts in the budget was spooking people.
He said if the Government set out how much it was going to raise from extra taxation next year, this could be divided by the number of households and so give people an understanding of what to expect.
For example, extra taxation of €500 million could be the equivalent of €5 per week per household. This was a more real figure for people than talk of billions.
He said the Government did not have to say what taxes it was going to raise, but could say how much it was going to raise through extra taxation so that the effect per household could be estimated.
“We need to speak to our own consumers as well as to the international markets,” he said.
He believed the Government should not seek to target a figure of more than €3 billion by way of capital and current spending cuts, and increases in taxation, he added.
