Ireland unlikely to need a second bailout, Merrill Lynch forecasts

Ireland is unlikely to require a second bailout deal, according to Merrill Lynch, one of the most upbeat commentators on the country’s economic prospects.

Speaking yesterday, Bill O’Neill, chief investment officer for Merrill Lynch Wealth Management in the EMEA region, said that Ireland will not require further aid even if it fails to restructure its bank recapitalisation costs; adding that “the role of Ireland as a proxy for contagion risk has gone”.

Back in January, Mr O’Neill gave a very bullish outlook for the economy, saying it could grow by as much as 1.6% this year, with the country’s trade position also likely to continue to improve.

Merrill — which acts as the wealth management arm of Bank of America — has since, however, lowered its growth outlook for the Irish economy to 0.6%, to more accurately reflect latest figures indicating a slowdown here and lower growth outlooks for the eurozone economy as a whole.

While more in line with most domestic economists, Merrill’s forecast for Ireland still ranks as one of the most optimistic.

Only the Department of Finance thinks Irish GDP will grow by more than 1% in 2012.

The Central Bank last week reiterated its stance that the economy is only likely to grow by 0.5% this year, but could shoot up by over 2% in 2013, adding that there should not be any need for an emergency budget to boost current year savings targets.

Mr O’Neill also commented on Spain, whose mounting borrowing costs have led to fresh fears of it needing a bail-out. Despite the European Commission saying that it stands by its earlier assessment that Spain does not need a bail-out programme, Mr O’Neill suggested the country may actually need more ECB support if a bail-out is not forthcoming. He said he did not think that the country at this stage would haveaccess to either the EFSF or the ESM, the eurozone’s temporary bail-out fund and its permanent successor.