Making bondholders pay ‘would cause contagion’

SHOULD Ireland decide to make senior bondholders pay part of the cost of restructuring the banks, it would cause market contagion, a senior economist has warned.

Willem Buiter, Citigroup chief economist, said he believed that it would be better if the eurozone agreed on such a step together, but he thought this was unlikely.

“The real question is will Ireland go it alone, which would upset its European partners and cause market contagion throughout the EU,” he said.