There’s growing speculation that Ireland could be bailed out sooner than we think.
Reports in European media suggest that the sense of relief felt Friday when the pressures on Ireland eased a touch have not been enough to calm nervous governments (especially German) and traders.
Ireland’s shaky position is due to be the chief topic at Tuesday’s monthly meeting of euro finance ministers in Brussels.
Ireland’s Finance Minister Brian Lenihan will be asked to provide an update on the bank rescue and on preparations for the 2011 budget and the four-year plan that is due to be revealed by the end of the month for submission to the country’s parliament and passing by December 7.
But it could now be a case that this meeting might be more along the lines of starting the negotiations for a rescue.
The Financial Times reported that European ministers spent much of the weekend discussing whether Ireland needed European Union aid ahead of Monday’s reopening of financial markets "in order to further reverse the two-week-old rise in borrowing costs which has pushed the eurozone to the edge of another debt crisis."
The FT reported that "according to a person familiar with the informal weekend discussions, ministers were debating whether the easing of pressure on Ireland was likely to continue on Monday or if further action was required. “When is the right time?” the person said. “Can they get through the markets on Monday?”
"The discussions, which are expected to intensify on Sunday, come despite public insistence by senior Irish officials that there is no need for Dublin to seek aid.
"Irish officials as well as other senior leaders, including José Manuel Barroso, the European Commission president, and Jean-Claude Juncker, the Luxembourg prime minister who heads the group of 16 eurozone countries, have said no application for aid has been made. "
And Bloomberg reported last night: “Germany is pressing Ireland to seek aid before a Nov. 16 meeting of European finance ministers to calm market volatility and win agreement on making investors help pay for future bailouts, a German government official said.”
The Irish Government has again rejected any talk of a rescue was being negotiated.
And Greece is likely to rejoin Ireland on centre stage in Europe’s latest woes tonight our time with the publication of fresh figures underlining just how rotten Athens’ financial position is.
Like Ireland, Greece has started cutting spending and raising taxes, but Prime Minister George Papandreou has now ruled out a recommended hike in the GST to 23% from 11% and more job cuts.
The PM said job cuts will now happen through attrition and he raised the possibility of Greece extending the repayment period for the 110 billion euros of aid it got from the EU and the IMF earlier in the year, a move that will upset Germany which provided much of the money.
Tonight, our time, Eurostat, the EU’s statistical group (like our ABS), reveals its revision of Greece’s budget deficit.
Currently at 13.6%, it is likely to rise to more than 15%, which will add to pressures for the country to cut deeper, a move already rejected by the Prime Minister. Ireland’s is 32.6%.
The third quarter growth estimates from Eurostat on Friday revealed that Greece’s economy contracted by 4.7% in the third quarter from the same period of 2009 and by 1.1% from the June quarter.
The economy is forecast to shrink by 4% in calendar 2010 and a further 2% next year; no wonder tax revenues are falling behind and the deficit is rising.
The Greek Government has to present its 2011 budget on Thursday, but before then a team of officials from the European Central bank, the EU and the IMF will be in Athens from today assessing the government’s financial position and progress with the required cuts to spending and tax rises.
The officials will decide at the end of the visit if they will release the third part of the 110 billion euro rescue package agreed to earlier this year.
This is worth 9 billion euros and will make a difference to Thursday’s budget statement if granted.
If not, or there’s a hitch, Greece could overtake Ireland as the source of concern for markets.
It looks like Greece will be a topic for the euro finance minister’s meeting as well.
It looks like Greece will be a topic for the euro finance minister’s meeting as well.
Ireland’s struggles came as figures were released showing the European economic recovery was fading.
Economic recovery in the eurozone lost momentum in the third quarter of this year, while industrial production fell sharply after a strong rise in August.
According to the European Union’s statistics office, Eurostat, growth in the 16 EU nations that share the euro slowed to 0.4% in the three months to September, down from 1% in the previous three months.
The slowdown was mainly due to a much slower growth in Germany where it was estimated at 0.7% in the quarter, sharply down on the 2.3% jump in the June three months. Growth data for Ireland was not available for Friday’s release.
While Finland led the continuing recovery with a quarterly growth of 1.3%, debt-laden Greece saw a contraction of 1.1%, according to Eurostat’s first estimate.
In the third quarter, the 27 national EU economies also grew b
