Ireland must ‘cut loan interest rate to survive’

A leading German economist has said Ireland’s debt, at close to 120% of GDP, is not sustainable and the only way of resolving it is if the interest rates on the country’s massive loans are cut.

His warning came as Fitch, the credit ratings agency, said that a Greek exit from the euro could severely affect banks in Ireland and Portugal, as markets would see both countries being next in line to leave the euro.

Ferdinand Fichtner of the German Institute for Economic Research, which offers advice to the German government, said he did not believe that restructuring the promissory notes or removing the interest paid from the Government’s deficit sheet would help sufficiently.