IRISH BAIL-OUT MAY NOT CALM MARKET FEARS - The world watched last night as the Government announced that it was tapping the IMF and the European Union for funds. The head of economic, fixed income & currency research at the London office of Kleinwort Benson, Phyllis Read, says the bail-out has given the euro zone some breathing space, but she warns that questions still remain over the likes of Portugal and the spectre of contagion has not gone away. She says that markets remain on the lookout for the next 'target'.
She also says that markets are still looking at Greece, despite its €110 bail-out, with some fearing that the country is not doing enough to reduce its budget deficit.
Ms Read says that while there are no details of how the bail-out will affect the Irish banking system, she says that questions remain over the subordinated bond holders and whether they should take a hit. She says that the ECB would not like to see senior debt holders taking some of the pain. She says that Irish citizens have had to take on board of lot of austerity in recent months, and adds that the Government is doing the right thing. The banks remain the problem, she states.
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MORNING BUSINESS NEWS - A look at some international comment at what is happening in Ireland can be divided neatly into comments about the wider stability of the euro and those decrying that their countries are, as they see it, emptying the litter tray left by the Celtic Tiger.
Portugal's finance minister Fernando Teixeira dos Santos said: 'The fact that Ireland can have a significant aid plan alleviates concerns, reduces uncertainty and reinforces market confidence. It is, without a doubt, a positive fact for the stability of the euro zone.'
*** But writing in the Wall Street, US economist Irwin Stelzer says a major policy error by the Government agreeing to bail out the nation's banks is that they are about to put control of the Republic's economy in foreign hands. He says all that is left for Ireland is to negotiate the terms of its surrender to the European Central Bank, the IMF and the EU and not least, the bond market. The only question now is whether the price Ireland will pay for help will include an agreement to raise the low corporate tax rate, as, he claims, French and German officials are demanding. If forced to do so it will be forfeiting its best chance to recover from its current ills. 'If Ireland retains its attractive corporate tax rate, it just might ease its plight with some significant economic growth,' he adds.
*** The Financial Times' columnist Wolfgang Munchau refers to debate about the 12.5% corporation tax rate. 'I fail to see where Ireland will grow. Does Dublin really think foreign corporations would be lured by low corporate tax rates and choose this moment to invest, given the current uncertainties,' he adds.
*** The International Herald Tribune's front page says that the threat of 'chaos' forces Irish hand. Saying Ireland buckled, it quotes Brian Lenihan from the This Week programme on RTE radio yesterday when he said the banks 'were too big of a problem for such a small country'. Inside there is a feature on the spectre of emigration and losing our best and brightest overseas.
*** The Times in London's front page reads 'Humiliated Irish forced into €85 billion bailout loan' with the story saying we capitulated last night to international demands to accept the bailout.
*** The London Independent's headline says 'Will Irish bailout spark contagion?' and the accompanying article says the deal is unlikely to assuage fears that other euro zone members will need a bail-out in the coming weeks.
*** The Daily Mail in Britain is using the line: 'Every family in Britain will have to pay £300 to bail out the Irish'.
*** Austria's Finance Minister said today that he did not expect Ireland to use any European Union aid for the time being, but that the bloc was ready to help Dublin. 'The safety net is open and Ireland has accepted this,' Josef Proell told state broadcaster ORF. 'But we must only make money available when Ireland actually needs to use the safety net and at the moment we do not see this and so we do not need to have money ready yet,' he added.
*** On the currency markets, the euro is worth $1.3744 US cents, up from $1.3683 cents on Friday evening. The euro is also worth 85.83 pence sterling.
