EU "crisis resolution mechanisms make Irish worse

Shudder over the past week, the voice of most of the Irish lost confidence in the market. Even for those who have been pessimistic view on the euro-zone countries, second-line people, the Irish 10-year bond yield rate shot up to 9% and 6% of the biennial rate of bond breaking is also alarming.

Ireland has two major problems. One can not sustain the financing appears. Second, the European on the "crisis resolution mechanisms," the timing of negotiations has been out of date. EU leaders have been efforts to recover such negotiations, claiming that the debt restructuring will not. But Ireland is under threat. Irish government needs to payment source. If the recipient is full of uncertainty, then as time goes on, investors will be how to react.

First of all, Ireland is a very serious economic problems, face is whether the solvency, rather than a liquidity problem. Ireland currently do have cash, but it seems without assistance, financing is difficult to maintain. The eight-day government announced a four-year financial plan before, recently, such as plans for 2011 would be difficult to convince people. The idea of fiscal 2011, "integration" 60 billion euros, close to the country's gross domestic product (GDP) of 4% but it is not clear what savings. Even so, the country's fiscal deficit-GDP ratio will exceed 9%, and debt to GDP ratio will exceed 106%.

The difficulty of improving on these figures we can see the serious solvency problems of Ireland. And then save 50 billion euros in fiscal spending will be significant numbers, but even assuming (although such an assumption no one believed) that the savings did not kill economic growth, fiscal deficit will remain equal to 6% of GDP, and debt to GDP ratio will climb to 102%. In the above problem, there is a problem - the Irish can withstand further tighten their belts, not cause deterioration of another wave of mortgage defaults and the banking crisis hit.

This problem may be a matter of political will, but the Irish did not seem ready for fiscal adjustment. That can not be happy reality is that the Irish banking sector assistance, and the 2009 deficit-GDP ratio of three points a situation, has the country's financial accounts and debt brought no stability to speak of the track.

The question now is how to help the Irish. European financial stability of institutions (EFSF) and the current negotiations on the issue of debt settlement mechanism is that investors do not know what their position. The EU struggling to cope with the Irish crisis, and need a helping stranded second-tier national programs. The traditional International Monetary Fund (IMF) standby instruments, coupled with a substantial fiscal adjustment and the creditors of the Irish guarantee, may be enough. The EU passed out of the inconsistent information, so that more vulnerable Irish Bingqu . (end)


- Translation proofreading Gao Qi


Reuters new e-mail products and services - the "Daily Finance Fair," so that you receive every morning the essence of the Reuters Global financial information and the latest investment trends. Please click here (here) opened this service.