Brussels, 12/11/2010 (Agence Europe) - A spokesperson for the European Commission said on Friday 12 November that the Commission had not received any request for any form of aid from Ireland. On the fringes of the G20 in Seoul (see related article), the president of the European Commission, José Manuel Durão Barroso, had felt he had to add that it was important to understand that the EU and the eurozone had all the necessary tools in place to act where necessary.
Concern about the Irish economy, in turmoil after bailing out the country's banking industry, and also at the prospect of automatic private sector involvement in the new eurozone debt crisis management mechanism are both pushing up the costs of refinancing for Ireland on the money markets. The interest rates now being charged are similar to chose demanded of Greece in May when the EU decided to step in with financial support. These concerns about Ireland seem to be speaking to other countries on the geographical periphery of the eurozone, like Spain, Italy and Portugal.
The increased cost of the famous Irish “spreads” does not have any immediate implications for the Irish government because it will not need to source new funding from the money markets until next summer. Irelands' banks, however, are finding it more difficult to refinance on the inter-bank market. The first key test is the four-year economic adjustment programme to be unveiled by the Irish government at the end of the month in order to bring the country back within the Stability and Growth Pact limits. The draft 2011 budget will be unveiled early next month. Facing a record deficit of 32% in 2010, the Irish government slashed public spending last week in order to make savings of €6 billion (see EUROPE 10253). This hot potato will clearly be high on the agenda of the Tuesday 16 November Eurogroup meeting of eurozone finance ministers. (M.B./transl.fl)