Donal O’Mahony provides a robust defence of Ireland’s creditworthiness in today’s Irish Times (article here; supporting Davy Research Report here). Dan O’Brien is more worried. While it is always worth some pause when second guessing the market’s average judgement, I’m inclined to agree with O’Mahony: I believe Ireland can avoid default, should avoid default, and will avoid default.
It is a pity he spoils things a bit with the straw man that many politicians and academics are advocating default.
In truth, foreign misrepresentation of the Irish story is being partly fuelled by domestic coverage. Given the clarion calls of many opposition politicians and academics for a default of Irish liabilities as a legitimate policy “solution”, the self-fuelling impression conveyed abroad is one of heightened insolvency risk.
I don’t see this chorus. Both Fine Gael and Labour were quite explicit this week that Ireland should not default. Even if the reporting is sometimes confused, the bright line between defaulting on sovereign debt/guarantees and allowing non-guaranteed investors in failed companies to bear losses is now well accepted.