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For the markets, Irish policy is not worth a shamrock

Translated Sunday 28 November 2010, by David Lundy and reviewed by David Lundy

Dublin is proud to take austerity measures worthy of the IMF to avoid a Greek bailout. Workers will foot the bill.

The Irish government and its central bank governor are upset. They are trying to persuade the markets that are worried about the ability of the government to pass next month’s budget, (the first of four planned austerity budgets) that they do not need a Greek-style rescue to reduce the highest budget deficit in Europe.

The yield gap between Ireland’s ten year debt and German bonds of the same maturity increased by 70 basis points on Wednesday to reach an unprecedented level of 645. Borrowing for two years costs 7.76% in Ireland. "For the moment, because the rest of the tax burden remains a key problem, investors are not yet fully confident (of the bank stock)," Central Bank Governor Patrick Honohan acknowledged. He said that austerity measures will probably not change, even if outside help were sought. Punch line: "I think the kind of plan that the IMF wants to see followed by Ireland is very similar to the type of plan the government is putting in place in the budget."

Let that be a warning for Irish workers. The IMF came to the rescue by pointing out that the Irish authorities had demonstrated their commitment to the €15 billion plan to reduce the budget deficit over the period 2011-2014 - an IMF plan identical to that of the EU. "There were no requests for financial assistance and relations with Ireland are normal," said a spokesman for the IMF. "The banks, households, businesses and government have all been under pressure, and a long recovery period for the consolidation of accounts of expenditure begun," insists Patrick Honohan, forgetting, incidentally, that "pressures" on banks are different from those faced by workers. The fact that state guarantees made to banks are still needed for two quarters is also crucial. Ireland is joined by Portugal, which has announced a drastic plan to reduce budget deficits, he said, to avoid having to seek IMF assistance.


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