Analysts predict a second bailout

Investors have a 50% chance of sharing losses in Irish government debt and the country will need a second financing package after the current programme comes to an end, Citigroup and Moody’s said yesterday.

Citigroup economist Michael Sunders said: “We still expect a sizeable growth undershoot and deficit overshoot, and expect Ireland will need a second financing package, which may include PSI (private sector involvement), beyond 2013”.

Moody’s, the credit rating agency, also believes Ireland will need access to money from the EU’s bailout fund, the ESM, but warns a no vote in the referendum on the fiscal treaty would block the country from the fund.

It says the uncertainty created by the referendum is a “credit negative” for Ireland, as a rejection of the treaty would mean losing the ESM safety net.

It points out the country will continue to receive loans under the €67.5bn EU/IMF loan irrespective of the outcome.

However, additional funding from the ESM would not be available.

This includes money to recapitalise financial institutions, and ESM intervention on primary and secondary markets to buy government debt.

“We expect Ireland to regain market access in 2013 and it will likely need to rely on the ESM when the current programme expires,” said Moody’s.