Six of the country’s leading economists have strongly criticised the Coalition’s decision to exit the bailout without a credit line, saying bumpy economic conditions could force Ireland to seek one later but under harsher terms.
The criticism came after the Taoiseach Enda Kenny announced in the Dáil that the Government had decided not to seek a precautionary credit line following a Cabinet meeting at which Finance Minister Michael Noonan recommended the clean break.
The leading commentators are critical of the move, with one arguing the Government had decided to jump without a parachute.
Economists Brian Lucey, Ray Kinsella, Tom O’Connor, David McWilliams, Donal Donovan, and Constanin Gurdgiev all questioned the decision.
Increased borrowing costs, a lack of external control over sectors in the economy, an unstable banking sector and fluctuating conditions in EU states could impact on Ireland, it was warned.
Several of the economists questioned if the long-term sustainability of handling Ireland’s heavy debt was being sacrificed for short-term political gain.
Standby or partial agreements with member states or the IMF would be preferable, they said.
One commentator even suggested that despite exiting without a credit line, Ireland had agreed secret “conditions” with Germany to potentially draw down funds from its development bank.
The governor of the Central Bank, Patrick Honohan, later told RTÉ he favoured a clean exit adding that he would have “done the same for Ireland”. He said the Government would now be dealing with the markets, “convincing them we are credit-worthy and a credible counterpart”.
He added the move was a statement of intent from the Government that it intends to maintain the path of “discipline” in its approach.
Earlier, Mr Kenny said following the Dec 15 exit from the bailout programme, Ireland was eligible for the €500bn backstop emergency funds provided by the European Stability Mechanism, but he warned there would be no cash windfall and the country faced challenging times.
Finance Minister Michael Noonan said €20bn was available in the NTMA to fund the country into 2015. Markets expressed little or no reaction to the move, which has been speculated for weeks.
Key national debt payments over next 10 years&:
* 2014: €7.074bn (total) €6.8bn (bonds)/€201m (to EU/IMF)
* 2015: €9.386bn (€3.6bn/€5.7bn)
* 2016: €12.715bn (€10.1bn/€2.5bn)
* 2017: €9.812bn (€6.4bn/€3.3bn)
* 2018: €16.788bn (€9.3bn/€7.4bn)
* 2019: €19.764bn (€14.4bn/€5.2bn)
* 2020: €26.952bn (€20.9bn/€5.9bn)
* 2021: €6.489bn (€37m/€6.4bn)
* 2022: €1.156bn (€39m/€1.1bn)
* 2023: €5.338bn (€5bn/€288m)
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