Ireland to re-enter debt markets as soon as possible
Ireland will resume borrowing as soon as investors feel more comfortable about its fiscal goals and prospects for other peripheral eurozone countries, the debt management agency said on Friday.
January 08, 2011 / 12:10 IST
Ireland will resume borrowing as soon as investors feel more comfortable about its fiscal goals and prospects for other peripheral eurozone countries, the debt management agency said on Friday.
The head of the National Treasury Management Agency (NTMA) said it was even possible Ireland could re-enter the debt market as early as this year.Under an 85 billion euro EU/IMF bailout package agreed late last year, Ireland has 50 billion euros to cover its sovereign funding costs for the next three years with the rest earmarked for its ailing banking sector.Despite the external assistance, Irish bond yields remain sky-high amid concerns future bank losses and a bloated budget deficit will prove too much and it could default.But the NTMA said Ireland's fiscal targets were achievable and the terms of the bailout programme which include loans of varying maturities up to 12 years and with an average maturity of seven-and-half years would help stagger repayments."The investor scepticism is understandable... (but) the IMF/EU package gives us breathing space to rebuild confidence," the NTMA's chief executive John Corrigan told a news conference."They are putting 67.5 billion euros of their own money on the line. It would be very remiss of them to do that on the basis of a debt programme that wasn't sustainable."He later told state broadcaster RTE news:"There are a lot of stresses within the eurozone... We will have to wait for those events to play out before we can return to the market. But it is possible that we would be back in the market during the current year, possible."Ireland's central bank governor said on Friday the EU/IMF bailout gave Ireland's fiscal adjustment external credibility.Ireland is providing 17.5 billion euros towards the package, including 10 billion euros from its national pension fund and 7.5 billion euros in funding the NTMA raised last year.Corrigan said investors should become more comfortable about Ireland's prospects during 2011 when a four-year, 15 billion euro austerity drive equivalent to around 10 percent of annual economic output is implemented.But he said there would also have to be greater certainty on the debt outlook for other struggling euro zone countries and EU plans for dealing with future financial crises before the NTMA could return to the market.Borrowing costs would have to be close to the average estimated cost of the EU/IMF package, which is around 5.8%, Corrigan said. The yield on Irish 10-year bonds stood at 9.38% on Friday.Corrigan said the resolution of issues in the country's banking sector, a radical strategy for which will be unveiled by the end of this quarter was vital to addressing the funding challenges Dublin was facing.He said a number of options were being considered to help shrink the banks' balance sheets, including the possibility of creating a new special purpose vehicle to house non-core assets or allowing the banks to split their assets into core and non-core internally."Having isolated the non-core (assets) clearly you would be indicating what you would be willing to dispose of," he said."What you would be taking your time on is the timing of those disposals because to rush that, the last thing you want is a fire sale of bank assets. Time is a good healer."Ireland's so-called "bad bank", the National Asset Management Agency (NAMA) which is run under the aegis of the NTMA approved the sale of close to 2 billion euros of its property assets in 2010, the NTMA's statement added.The assets were sold to pay down debts either to NAMA itself, to the banks involved or to non-NAMA banks that had co-lent on relevant developments.NAMA was set up in 2009 to purge almost the entire banking sector comprising Anglo Irish Bank, Allied Irish Banks, Bank of Ireland, EBS and Irish Nationwide building societies of risky commercial property loans. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
