Further EU aid ‘will be needed after 2013’

FURTHER EU financial aid will be needed by Ireland after 2013 to help it raise funds, according to NCB Stockbrokers.

A new report entitled “Ireland Moves Forward” says if the EU and the IMF conceded a lower interest rate on the €85bn bailout it would increase the probability of Ireland being able to stand on its own financially by the end of 2014.

On the general economy NCB envisages “a two-tiered recovery will be the order of the day” with exports continuing to grow but domestic demand remaining weak.

It will be a “two-speed” and jobless recovery, it said.

The country’s competitiveness has improved significantly through the economic downturn while foreign direct investment in Ireland increased significantly last year, despite an overall global decline in FDI of 8%.

While last year was a “stellar year” for FDI and with competitiveness showing serious gains, the report doubts if we can survive with further financial support.

“Our central view, based on the current EU/ECB/IMF package, is that Ireland will need further EU help post-2013 to raise funds and as a result will be rolled into the permanent European Stability Mechanism,” said NCB.

The analysis also identifies state assets that could be sold off to help the Government finances, including those in the areas of forestry, energy, and ports.

It said the VHI, Coillte, Bord Gáis and the ESB could be sold on to help lower the debt burden currently pulling the country towards the abyss.

By lowering the interest rate on the €85bn loan the EU would also give Ireland a higher probability of weaning itself off aid by 2014, NCB said.

The report warned however that any post-general election attempt at re-negotiation of the terms of the bailout would leave us with a deal that looks “very similar” to the existing one.

The only changes would be in the exact details of how the €15bn in budget corrections would be achieved.

As the Irish banking sector remains reliant on the state for capital and on the ECB and Irish Central Bank for liquidity it said the March stress tests will determine whether any additional capital is needed apart from the €10bn already earmarked for the financial institutions.

NCB predicts that the National Assets Management Agency will be a major “dictator of activity in 2011” in the Irish property market and beyond.

In relation to housing it says a further 10% decline in prices from the peak levels is on the cards for 2011.