This is very reassuring news. I slept a lot better last night after reading it.
The International Monetary Fund said on Wednesday there was no reason to think that Ireland will need IMF financing, after an Irish broadcaster reported that the country may need IMF help if its economic prospects worsened. Irish Prime Minister Brian Cowen, on a visit to Japan, quickly denied the report by broadcaster RTE which was picked up by other media outlets, sending the euro falling more than a cent against the dollar.”The authorities have been clear today. We agree. There is no reason to think that IMF financing will be needed,” an IMF spokesman said in a statement.
Unfortunately, this article in the Financial Times quickly undid all the calming effects of eight hours solid sleep.
Irish credit default swaps, which measure the marketâ€™s view of the probability a country will default on its sovereign debt, jumped close to record highs before Dublinâ€™s denial. The government calculates that, if it sticks to the pay deal agreed with unions in September, the deficit will rise from 6.5 per cent of gross domestic product in 2008 to 10.5 per cent this year, and remain at 11-12 per cent up until 2013…….The Irish government, in a submission to the European Commission last week, said it was aiming to bring the deficit to less than 3 per cent in 2013.
And of course Ireland’s is far from being one of the worst case situations here. The rumpus we are witnessing seems to have been caused by a veiled threat – strongly denied – from Brian Cowen that if unions failed to agree to a proposed 5% cut in public sector salaries there would be no alternative to calling in the IMF. Come on everyone, tidy up the living room, daddy will soon be home from work!