ECB intervention is 'critical' in offsetting Covid-19 borrowing costs for Ireland     

Kieran McQuinn, research professor at ERSI Photo: Sasko Lazarov/Photocall Ireland

The critical role the ECB is playing in buying government bonds across the eurozone that ensures Irish sovereign costs are kept at historically low levels will be "significant" in ensuring Ireland emerges from the Covid-19 crisis, the Economic and Social Research Institute (ESRI) has said.    

It comes as ECB President Christine Lagarde on Thursday said it has an additional €500bn in bond-buying approved to safeguard the eurozone from a potential Covid-driven slump.

In research by professor Kieran McQuinn, the think tank said huge market intervention by the ECB "mitigates the decline in output significantly" that would otherwise have emerged from the Covid crisis for the Irish economy.

"Over a five-year horizon, we estimate that the participation of the ECB in this manner could reduce the loss in Irish output by more than two percentage points compared to when the debt is raised purely through private markets," Prof. McQuinn said.     

"The ECB intervention would also reduce the increase in the deficit and public debt which will occur due to the pandemic," he said. 

The ECB has bought all types of bonds to ensure European interest rates stay at historically low levels during the crisis. 

For Ireland, it has meant the Government can borrow at a negative yield which means the State pays back less than it has borrowed. 

The State will borrow a total of €40bn this year and in 2021 to cover the huge costs entailed in fighting the Covid economic crisis. On Thursday, the Irish 10-year bond was trading at -0.3%.