In order for Ireland to be able to return to debt markets in 2012, it may need to ask for another loan from the European Union and International Monetary Fund. Leo Varadkar, Irish minister of Transport mentioned that he believes it is highly unlikely that Ireland will be able to raise cash funds next year without a new loan.
The Transport Minister was the first to publicly doubt Ireland’s ability to raise cash on the bond market.
In his comments to The Sunday Times newspaper he said, “I think it’s very unlikely we’ll be able to go back next year. I think it might take a bit longer … 2013 might be possible but who knows?”
“It would mean a second programme (of loans from the EU/IMF),” he added. “Either an extension of the existing programme or a second programme. I think that would generally be most people’s view.”
Ireland wants to tap investors for funding in 2012 before its 85 billion Euros joint EU/IMF bailout is depleted the following year.
But investors believe Ireland will be unable to return to the market and instead will have to tap the European Union’s permanent rescue fund in 2013, which might require some restructuring of privately held sovereign debt.
Reflecting this medium-term risk, Ireland’s two-year and five-year paper are yielding close to 12 percent, more than its 10-year bonds on the secondary market.
Could Ireland become another Greece and go on the path to debt default?
Deputy Prime Minister Eamon Gilmore told broadcaster RTE that fears of a domino effect from Greece’s problems were overblown. The possibility of a Greek default has sent bond yields rocketing for indebted Ireland, Portugal and Spain.
“It’s not a situation that if Greece defaults then there are immediately implications for Ireland,” Gilmore said.
“If Greece defaults there are implications for the wider Euro zone and obviously we are part of that.”
“It is wrong to put Ireland in the same basket as Greece.”