ECB wanted Ireland to take credit line, but Kenny decided to go it alone

Thursday 14 November 2013 14.59

 

Credit line - the Cabinet has decided to go it alone

by Business Editor David Murphy

The biggest question regarding Taoiseach Enda Kenny’s announcement that Ireland is exiting the bailout without a credit line is whether it was the right thing to do.

The ECB last week said it would be prudent to have the support of a back-up facility. But the Cabinet has decided to go it alone instead.

The reality is that without a new German government in place, there was nobody to which Ireland could have applied for the credit line in any case.

Chancellor Angela Merkel is not expected to wrap up coalition negotiations until the end of the year, by which time Ireland would already have left the bailout.

This left the prospect of Ireland seeking a €10 billion credit line possibly in the New Year. Politically the timing of this may have not been attractive because it could have been perceived that Ireland was facing renewed economic weakness.

But there are some reasons why entering the financial markets without the additional support is not such a big deal.

Firstly, Ireland has about €25 billion in cash at the moment. So even if the financial markets seized up again – in the event of another euro zone calamity – there would still be enough money to run the country.

Secondly, there are now other mechanisms to support Ireland if it hits turbulence as the Government has pointed out in this statement.  Many of these were not in place when the country sought emergency assistance in 2010.

However, if Ireland did get into renewed difficulty it is likely other countries would be in trouble too. That would mean there would be a queue of nations looking for help. If Ireland had a credit line it would not face that problem.

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