Saturday, January 19, 2013

19/1/2013: Ireland's cost of funding

An interesting chart in today's IMF review of Greece:

Now, that's right - prior to Bailout 2.0, Greece led the euro area in terms of its overall Government debt financing burden as % of GDP and Ireland ranked 3rd in these dubious (in virtue) rankings. After Bailout 2.0, Greece funding costs are now below euro area average (ranked 7th) and Irish ones are ranked 2nd highest after Italy.

Now, note that this means that Ireland has the highest debt financing costs of all countries in Troika bailouts. In other words, with hefty subsidy to our cost of funding via EFSF et al, we are coming out very poorly. What will happen if we 'regain access to the markets' at costs higher than those under the Troika bailout?..

Although approximate, a deal to bring Irish debt financing costs to euro area average would see the Government benefiting from savings of ca 2.3% of our GDP annually or ca EUR3.73 billion making measures passed in Budget 2013 in their entirety unnecessary.
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