Central Bank Governor Professor Patrick Honohan says the country's critics are failing to recognise the dynamism of Irish exports as the country quickly returns to a current account surplus, or the revolution in public accounts as tax reform kicks in.
In an interview in today's Daily Telegraph Professor Honohan also said that Irish tax revenues are undershooting a little but are not yet a worry. He is quoted as saying that the net cost to the Irish State of recapitalising the banks is €25 billion, or 15-16% of Irish GDP.
He said the premium investors' demand to hold Irish 10-year bonds over German bunds is 'ridiculous' and a setback after budgetary reforms.
'The spreads are a setback for our hopes of a narrowing to reflect the fiscal credibility of the country,' Professor Honohan said in the newspaper. 'I don't look at them every day but at this level they are ridiculous.'
Spreads on Irish 10-year bonds reached 2.97 percentage points over German Bunds yesterday amid reports the European Central Bank is intervening to shore up Irish debt, a reversal of the bank's plans to withdraw emergency support.
The rise in spreads come after higher costs to support Anglo Irish Bank were revealed earlier this week, when the European Commission said it approved Government support worth €24.3 billion for the bank, significantly higher than earlier estimates.
Professor Honohan also said that Ireland is not at risk of being pushed into a deflationary spiral by the discipline of European Monetary Union membership.
