Our fate is already sealed – now stand by for the nuclear option

THIS week’s visit by Olli Rehn from Brussels sets the domestic mood music for the Government’s draconian budget.

Financial discipline and consequent austerity is being demanded from Brussels. We’re not getting the full story. The fiscal difficulties of Ireland that have led to our dependence on the European Central Bank (ECB) have consistently been understated. It’s not in our Government’s or ECB’s interest formally to announce Ireland is beholden to the EU Stabilisation Fund. It is obvious that the bond markets are not going to fund us at sustainable rates.

The Central Bank and ECB are ultra-secretive about the extent to which they have underwritten the finances of the state and our financial institutions. €40bn of NAMA bonds were transparent. The recapitalisation and deposit base of AIB and Bank of Ireland is less clear. Reports suggest ECB involvement of up to €260bn. The National Treasury Management Agency (NTMA) is due to re-enter the bond market early next year, with Government cashflow requirements of at least €20bn. Perhaps a quarter of this needs to be raised in the spring. An abortive bond launch places us in the same dilemma as the Greeks last April. Mutual denial exists between Dublin and Brussels about the inevitability of our fate.