IRELAND BUNDLED IN WITH GREECE AND PORTUGAL IN MARKET EYES - Greece's fiscal troubles have sparked renewed market concern about the sustainability of public finances in Europe, as the global economic downturn led to surges in public debt and budget deficits. On the front-line in the markets at the moment are the smaller peripheral economies in the south of the euro zone, but the surge in debt and deficits is also a challenge for many of the larger economies inside and outside the zone.
Brian Lucey, from the Business School at Trinity College, says the fact that the cost of insuring debt in Greece and Spain has risen sharply means that we are bundled in the minds of many in the markets in the not very flattering group known as PIGS. This stands for Portugal, Ireland (or Italy), Greece and Spain. The market continues to see us as the weaker links of the euro zone.
Mr Lucey says that when something happens in one of those countries to increase the cost of both insuring debt and the cost of borrowing, costs for all the so-called PIGS countries are dragged up. The economist says it is important to note that the Irish position has not been deteriorating in recent months. He says the market has kept a constant view of the cost of Irish borrowing since about the second half of last year. He says the pressure has been mainly on Greece and latterly on Portugal. He says the financial situation in both Greece and Portugal is much worse than the Irish situation and also points out that they are both much larger economies. The potential damage for the euro zone if something goes wrong with either Greece or Portugal is much greater than Ireland.
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LITTLE ON THE HORIZON FOR IRISH CONSTRUCTION INDUSTRY - Business conditions in the Irish construction sector kept getting worse last month. Activity and new business fell sharply and jobs were cut at a considerable pace, according to the Ulster Bank construction purchasing managers index. General activity had fallen every month since June 2007, while activity on residential projects has fallen in every month since November 2006.
The Ulster Bank report's author Simon Barry says the message from the latest survey is that the construction sector continues to shed jobs at a fairly heavy pace and that dynamic has not changed over the past 12 months. He says that output remains under considerable pressure and is reflected in continued declines in all of the main sub-sectors including housing, commercial and civil engineering. With new orders continuing to fall, he says there is very little reason for firms in the sector to engage in any hiring activity. However on a brighter note, Mr Barry says that firms are reporting a strong pick-up in optimism for the next 12 months with the future expectations index jumping by about 10 points.
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MORNING BRIEFS - Figures out this morning show that Aer Lingus' total passenger numbers last month were 665,000, an increase of 0.6% compared to January 2009. Short haul passengers were up 3.8% to 608,000 while long haul passengers were 57,000, a fall of 23% on January last year. Its overall load factor in the month was 67.4%, an increase of 3.1 points compared to January 2009, as capacity fell by 10.7%.
*** IBEC's Retail Ireland wants all local authorities to give retailers a 10% rebate on commercial rates given the challenges the sector is facing. It has written to the Chairperson of each local authority and city and county managers to ask for the rebate on bills paid last year, and that upward revaluations be suspended. Retail Ireland says that over the last year 30,000 jobs were lost in the sector, and it Is struggling to avoid further redundancies over the coming months.
*** The euro is falling this morning as investors worry about the euro zone's debt problems, despite assurances from European finance ministers at the weekend. At the G7 meeting over the weekend European ministers said they would make sure Greece sticks to its budget-cutting plan. But analysts say Europe needs to go beyond words to restore confidence among investors worried that problems in Greece, Portugal and other weaker states could upset or derail the global economic recovery. The single currency has dropped around 10% from a 15-month high of $1.5145 in late November.
*** A report for the Unite Union by consultants Farrell Grant Sparks, says a third force in Irish banking, including Bank of Scotland Ireland, should rival AIB and Bank of Ireland by specialising in loans to small business. Unite represents staff at EBS and Bank of Scotland Ireland. The report says a four way merger of EBS, Permanent TSB, Irish Nationwide and BOSI, would be able to rival the bigger banks.
