This week I will be writing about one of the most talked about topics of the week: the possible bail-out of the Irish Republic. The main articles I read this week were "Debt crisis team heads for Dublin" from the Financial Times and "EU begins Irish Republic bail-out talks" from the BBC News. As many of you may already know, Ireland is facing a recession at the moment, with unemployment rising and housing prices falling. Ireland has also been doing quite poorly with its governments bonds, which are usually regarded as safe long term investments, but in Ireland's case, with the market prices falling, the yields have been pushed up. The yield on a 10-year Irish bond reached around 9%, which is very high when compared to the UK's government 3% (Greece's yield is around 11%). Ireland now has to decide if they want to ask for help from the Eurozone and be bailed out as happened to Greece. When Greek bonds reached levels which made it impossible to make money from the bond market they turned to the International Monetary Fund and the European Union.
http://www.reuters.com/resources/r/?m=02&d=20101116&t=2&i=250299040&w=460&fh=&fw=&ll=&pl=&r=2010-11-16T090914Z_01_BTRE6AD1SMB00_RTROPTP_0_IRELAND-POLL
The EU finance commissioner Olli Rehn said that they were already making bail out plans to help Ireland if the country decided to ask for help and that they were now much better prepared since a bail-out had already been done for Greece earlier this year and they know what to expect. The UK is ready to help Ireland for obvious reasons as British Chancellor George Osborne said "Ireland is our closest neighbour and it's in Britain's national interest that the Irish economy is successful and we have a stable banking system"(Niels, B. 2010). Some reports say that the UK is willing to give billions of pounds of direct loans to Ireland, this is because the UK's finance is linked with Ireland's finance since many of the UK banks have strong exposure in Ireland. BBC News also said that the Irish banking system needs to be "restructured" and that the Irish government will have to have a consultation with the Commission, the European Central Bank and the International Monetary Fund in order to see where the problems are and what needs to be fixed.
http://www.guardian.co.uk/business/2010/nov/17/ireland-bailout-debt-crisis
The Financial Times revealed that a team of EU and International Monetary Fund will visit Ireland on Thursday to talk about this debt crisis, many professionals see this as a confirmation that Ireland will ask for the bail-out very soon.
In my opinion there are two major problems with the crisis in Ireland. First of all, I believe Ireland is an extremely proud country and they will not be very happy if they have to accept help from the European Union. There have been many talks about Ireland in 2008 when they said no to the Lisbon treaty and then finally accepted it in 2009 (which seemed slightly forced because many people voted yes so that Ireland would not be blamed for the end of the Lisbon Treaty). The second problem I believe is that we cannot keep bailing out every country that has problems, yes, we should all be a big European community but I think that by bailing out first Greece, now possibly Ireland and who knows how many countries will follow, the European Union is simply hiding the mistakes the countries have made and is not really tackling the core problems. Will these countries ever be able to pay off these debts? I doubt it.
Have a good week,
The Financialista
BBC:
Blythe, Niels (2010) "Q&A Irish Bond Crisis" Date Viewed: 16th November, 2010. Available online at:
http://www.bbc.co.uk/news/business-11743952
News Business (2010) "EU plays down Irish Republic bail-out talks" Date Viewed: 16th November, 2010. Available online at:
http://www.bbc.co.uk/news/business-11771574
Financial Times:
Spiegel, Peter (2010) "Debt crisis team heads for Dublin" Date Viewed: 16th November, 2010. Available online at:
http://www.ft.com/cms/s/0/54c2f752-f171-11df-8609-00144feab49a.html#axzz163JTRtg0
The Guardian:
Wearden, Graeme (2010) "Ireland's Debt crisis -today as it happened" Date Viewed: 16th November, 2010. Available online at:
http://www.guardian.co.uk/business/2010/nov/17/ireland-bailout-debt-crisis
Images:
Reuters (2010) Date Viewed: 16th November, 2010. Available online at:
http://www.reuters.com/resources/r/?m=02&d=20101116&t=2&i=250299040&w=460&fh=&fw=&ll=&pl=&r=2010-11-16T090914Z_01_BTRE6AD1SMB00_RTROPTP_0_IRELAND-POLL
Wearden, Graeme (2010) "Ireland's Debt crisis -today as it happened" Date Viewed: 16th November, 2010. Available online at:
http://www.guardian.co.uk/business/2010/nov/17/ireland-bailout-debt-crisis
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