Failure to Catalyse

While the change of government has brought a welcome fresh start, long-term bond yields – and the implied probability of an Irish default they signal – continue to rise.   The 10-year yield is now above levels that forced Ireland to seek the EU-IMF assistance programme in November.  It is of course early days.    But there is no getting away from the message the bond market is sending.  

The hope behind the programme is that it would catalyse private funding.    With this in mind, it is interesting to look at the literature on the catalytic effect of official funding, much of it originating from the IMF itself (see here for an example).   The basic idea is that official funding can be a complement to private funding.   

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Sutherland: EU Must Rethink Ireland’s Deal

Peter Sutherland makes the case for rethinking Ireland’s bailout deal here.

Northern Exposure

The FT Analysis page explains the opposition of some Northern European politicians to bailouts in this article.

Won’t Pay

The FT reports on “austerity fatigue” in Greece in this article.

Ireland Once Again Among the Poorest Countries in Western Europe

I heard one of the new TDs on the radio, repeating that well-practiced line about Irish government expenditures/entitlements not really being excessive, since “Ireland is one of the richest countries in Europe.” That was then, this is now (from the Sunday Business Post). Using GNP as a metric, Ireland’s per capita income ranking has fallen sharply, back to where it was prior to the 1990s boom, among the five poorest (or least-rich) countries in western Europe. The Irish government and banking sector are also in receivership, and are dependent upon a recalcitrant EU benefactor. So please, TDs and interest group lobbyists, no more about how we can afford your favourite expenditure since we are one of the richest countries in Europe.