IMF: Irish outlook positive

AJAI CHOPRA who led the IMF’s negotiations on Ireland’s bailout and who has a reputation as a fearsome negotiator said he thought the long-term outlook for Ireland was good given his experience in dealing with other stricken economies.

Asked about senior bondholders taking some of the pain for the bank bailout, he noted that the bailout programme includes the option for the Government “to explore further liability management exercises that apply to subordinated debt”.

Speculation was rife that the IMF favoured burning all bondholders, including senior lenders to the banks, in the interest of lowering the burden on the state and the Irish taxpayer.

Speaking from Brussels last night after the bailout was signed off by EU finance ministers, Brian Lenihan was more explicit.

He made it clear that both the EU and the ECB were fundamentally opposed to such a move. As the rescue programme was discussed they said “no money would be made available” if the Government insisted on such a line of action.

Mr Lenihan said “no eurozone country had defaulted” on the senior debts and the EU was not going to tolerate such a move from Ireland.

In Dublin Taoiseach Brian Cowen stressed the importance of Ireland honouring its debts.

He said there was “no support from Europe” as the EU believed such a move would have a knock-on effect and cause havoc for other countries struggling to meet their debt problems.

Speaking at an IMF press conference in Dublin, Mr Chopra confirmed that the cost of borrowing for the €22.5bn from the IMF would be 3.1%, well below the 5.8% average for the whole package.