Irish central bank Governor Patrick Honohan said the country would avoid economic “doomsday,” as a government minister and prominent professor suggested the nation should reschedule debts from its as much as 85 billion euros (US$121 billion) bailout.
Honohan was responding to Morgan Kelly, an economics professor dubbed Ireland’s Doctor Doom, who wrote in the Irish Times newspaper that Ireland faces a “prolonged and chaotic national bankruptcy.”
“What we are working on is a plan, that if things go well in terms of economic growth, is clearly something that will bring debt on a sustainable path,” Honohan said in an interview with Dublin-based RTE radio on Sunday.
“If things don’t go well, it will be much more difficult. In that case, there will be a problem,” he said.
Kelly said the country faces “economic ruin” unless it walks away from last year’s bailout, withdraws support for banks and cuts its fiscal deficit to zero.
Ireland’s debt will peak at 116 percent of GDP in 2014, according to government forecasts published on April 29. The figure was 25 percent at the end of 2007.
Irish Energy Minister Pat Rabbitte said on Sunday “in my own view” the debt stemming from Ireland’s bailout “must be rescheduled.”
Ireland last year sought the bailout as investors shunned government and bank debt after the economy shrank about 15 percent since 2007. Talks on the terms of the aid are continuing, with the government seeking a cut on the average 5.8 percent interest rate it are paying on the loans.
The debt “is a serious problem and needs to be managed in discussion with our European partners,” Honohan said, adding Ireland is on “a very low growth scenario.”
“We are keeping our options open,” he said.
“We have a number of cards, we don’t have many cards, in these negotiations. There is a right time to play your most important cards,” he said.
In an interview with RTE, Rabbitte said he hopes that the “punitive” rate on Ireland’s bailout may be reduced at a meeting of European finance ministers this month after European Commissioners gave a “notice of approval” for a reduction.
The country’s loans will be repaid in line with their terms and conditions, Eoin Dorgan, an Irish Finance Ministry spokesman, said on Sunday in a telephone interview after Rabbitte’s remarks. He said a report in the Irish Mail on Sunday that the country may restructure its debts is “completely outlandish.”
The Mail reported that the government might restructure debts to the European Union and the IMF, citing an unidentified “senior minister.”
The cost of insuring Irish sovereign debt against default for five years rose 10 basis points to 669, according to CMA prices. The credit default swaps cost 644 basis points for Portugal and 1,360 for Greece.
The extra yield investors demand to hold Irish 10-year bonds rather than German securities of similar maturity narrowed 4 basis points to 714 as of 9:37am in London. A basis point is 0.01 percentage point. The spread was 646 on Nov. 6, just before Ireland’s bailout was agreed.
Kelly wrote the bailout might be considered an “abject failure.” A University College Dublin economist, Kelly was given the “Doom” nickname by newspapers after he forecast in 2006 that Irish property prices may decline as much as 80 percent.
Kelly said ownership of Ireland’s banks should be handed over to the European Central Bank and the government should immediately reduce the fiscal deficit to zero from about 10 percent of GDP. That would allow the country wean itself from reliance on outside aid and slash its debt.
“I always take him seriously,” said Honohan, adding that a lot of his analysis is “absolutely spot on.”
Also, “there are some serious errors in it. The story he spins is somewhat incomplete,” Honohan said.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US