Wednesday, December 19, 2012

19/12/2012: IMF gets angry...


So IMF released 8th review of Ireland's programme (link) and just as I speculated here two days ago, the Fund is loading the bases with stronger and stronger language on dithering EU's failure to deal with irish Government debt overhang arising from the banking sector measures.

Quoting from the IMF report, emphasis is mine:

"Ireland’s remaining vulnerabilities imply that prospects for durable market access depend importantly on the delivery of European commitments. Market conditions for Irish sovereign debt are much improved following the  announcements of the ESM direct bank recapitalization instrument and of OMT. But the feasibility of retroactive application of the ESM instrument for Ireland remains unclear as do the conditions for OMT qualification.

Given Ireland‘s high public and private debt levels and uncertain growth prospects, inadequate or delayed delivery on these commitments poses a significant risk that recently started market access could be curtailed, potentially hindering an exit from official financing at end 2013."

The fund, in essence, is now on the record saying that Irish exit from the programme is at risk from only EU failure to act (assuming that irish authorities continue with current path):


"Management of the risks to market access, and hence to meeting the exceptional access criteria, depends on continued strong program performance and also on delivery of euro area commitments."

I agree with the Fund. Ireland has done enough under the programme to move us toward exiting the funding arrangements (whether that is desired or not, is a different question). However, EU institutions (namely ECB and - via absence of support for Ireland - EU Commission) have first forced Ireland into the current insolvency, and then proceeded to stonewall us in the search for workable solutions.
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