Greek shadow still hangs over Irish recovery
The agency’s boss John Corrigan offered reassurance on our current funding needs earlier this week in an interview with Bloomberg television in London.
“I wouldn’t be unduly worried about it”, he said of the Greek crisis..
NTMA has stepped up its reassurances as the cost of borrowing for Spain, Portugal and Ireland has risen as the “contagion from the Greek crisis spreads to other vulnerable EU countries.
Ireland has substantial cash balances, to weather the current storm, Corrigan said.
Given the NTMA’s track record on managing the national debt what Corrigan has to say ought to be reassuring for all.
One of his senior staff yesterday felt the need to reiterate the fact that in terms of funding the 2010 Budget the country has already raised €12bn of this year’s €20bn borrowing requirements and it also has cash it can call on of around 23bn to fill any gap in the interim if it remains too expensive in the short term for the NTMA to issue more bonds in the months ahead.
Given the state of our finances we are bound to have to pay significantly more for our borrowings than Germany given the fundamentals of the country’s public finances.
In the past few months we had come down to less than 2% above the German rate, but that has changed in the past while and the fear is that it could get worse.
A lot will hang on how the Greek rescue package pans out in the weeks ahead. Should it for any reason go pear-shaped and Greek borrowing costs go even higher, Irish borrowing costs will also rise.
It should be borne in mind that Germany is getting very edgy about the finances of country’s such as Portugal, and Spain as well as Greece. We would do well to bear in mind that the EU Commission has called for greater clarity on the savings we have promised to make in the current year.
They total €3bn and the Government still has to say how those savings will be achieved.
If the markets get more nervous about how we are performing then such gaps in our strategy are in danger of becoming magnified.
However, such notable heavyweight publications as the Daily Telegraph and the Financial Times believe Ireland has been making very real efforts to get its economy back on track.
Ireland is about 18 months further down the line in terms of tackling the issues currently threatening the financial stability of Greece and other member states.
We have made progress, but if the situation in Greece worsens for whatever reason a real danger exists that we could be dragged under with Greece. In that sense the reassurances from the NTMA have to be viewed in that context.
Our banks are still in a terrible state despite the real efforts made by Brian Lenihan to sort out the mess through the NAMA process.
The Germans are brassed off with the way some countries have failed to meet the strict EU guidelines on national accounting, but luckily for us they decided that rescuing Greece was probably cheaper for us all in the long run than allowing it to go under.
The markets are also giving out very clear signals that they are not happy with the current state of some EU countries.
We ignored their warnings about the house bubble and we could be in for another severe shock in the months ahead if they decide we are still a bad risk.
NTMA’s reassurances need to be viewed against that backdrop.
