ECB support ‘stopped total Irish collapse’

A Central Bank study has revealed the only thing that kept Ireland from experiencing a catastrophic collapse was support from the European Central Bank.

A technical paper from the Central Bank entitled ‘Was the Securities Markets Programme Effective in Stabilising Irish Yields?’ found the programme had prevented a total collapse in Irish bond yields.

“It prevented some catastrophic movements of yields when market participants most feared an absence of liquidity on the buy-side of the market,” the paper said.

The Securities Markets Programme was launched in 2010 and allowed the ECB to buy bonds of countries including Ireland.

The ECB spent over €210bn in purchasing bonds as part of the SMP in the two years to Sept 2012, when European powers announced a new programme of outright monetary transactions.

The point of SMP was to stabilise the international bond market, which the eurozone perceived as malfunctioning.

In relation to Ireland, the SMP cushioned the blow the economic crisis could have caused.

“These reduced risks for investors may have prevented a more acute crisis [and rise in yields] and could have contributed to expectations of stable market conditions,” the paper said.

The authors found the programme successfully controlled Ireland’s bond yields.