Honohan: Positive market perception needed to prevent funding cost increases

The Governor of the Central Bank says his main goal is to ensure that the Government's funding costs are not damaged by a market perception that it may not deliver on its budgetary intentions.

Patrick Honohan was addressing a conference in Dublin that is discussing regulation and banking after the international financial crisis.

Ireland's cost of borrowing hit a record high this morning.

"I have recently been looking more closely though at the multi-year prospects for the Budget," said Honohan.

"Of course it can be said, if the economy stays close to the track originally envisaged, the deficit would come close to 3% by 2014. But as the IMF and others have noted, the real economy, the price level and also interest rates on Government borrowing, have evolved in a less favourable way.

"Servicing of the additional debt related to bank restructuring is also a negative factor.

"Some explicit reprogramming of the budgetary profile for the coming years is clearly necessary soon if debt dynamics are to be convincingly convergent."