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Irish report Irish report
by Euro Reporter
2011-10-01 11:45:08
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Ireland considers using new E.U. fund too

In Ireland’s Finance Ministry, officials are engineering a manoeuvre that may make the difference between default and financial survival. The impetus for the plan is the cost of bailing out Anglo Irish Bank and Irish Nationwide Building Society. Ireland paid an initial €31 billion, or $42 billion, to save the two lenders, averting what central bank governor Patrick Honohan called a “European Lehmans” in a nod to the collapse of Lehman Brothers in September 2008.

To cut the final bill of at least €48 billion, including interest, Finance Minister Michael Noonan may seek to exploit the euro region’s debt crisis by tapping the area’s expanding rescue fund. That would deliver money at lower interest rates and over a longer period than selling bonds, reducing what Mr. Noonan has called the “extraordinarily expensive” tab as the state seeks to win back economic sovereignty. “Ireland is really on the fringe between debt sustainability and unsustainability,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin. “The cost of funding this every year could play a big part in the difference, ultimately, between the two scenarios.”

Ireland’s 10-year borrowing cost, which reached 14.22 percent in July, dropped below 8 percent on Wednesday for the first time this year, and is currently at a nine-month low of 7.53 percent. The cost of insuring against the nation defaulting for five years has dropped to 677 basis points from 804 during the past two months, according to CMA prices, implying a 44 percent probability of Ireland failing to meet its obligations. The International Monetary Fund said on Sept. 7 that it expects Ireland’s general government debt to peak at 118 percent of gross domestic product in 2013, equivalent to almost €200 billion. That’s up from 25 percent of G.D.P. in 2007.

Ireland last year was forced to seek €67.5 billion of aid, after its banking woes became too big to handle alone. On Sept. 30, 2008, the then-government guaranteed most of the debts of its biggest banks, with the state agreeing to inject about €62 billion into the financial system to date. As the bill for the two banks soared last year, then Finance Minister Brian Lenihan decided to hold off injecting all the money into the two banks straight away. Instead, he promised to give them the cash over 10 years, by issuing promissory notes to the lenders for the full amount.


Ireland’s drug problem continues to grow outside of Dublin

The demand for homeless and drugs services continues to increase in Ireland and the problems are not just growing in the capital. According to Merchants Quay Ireland’s Annual Review for 2010, the drugs crisis is a national crisis as it is not confined to Dublin. The charity now operates in eleven counties across Ireland and over 20 per cent of clients accessing its residential rehabilitation services are from the greater Cork region.

Despite a significant drought in heroin in the last six months of 2010, MQI worked with 575 new injectors throughout the year. Altogether, the organisation worked with 4,308 clients in its drugs services and, during the year, the number of visits to MQI’s needle exchange was just under 25,000. The demand for drugs remains constant, said chief executive Tony Geoghegan.

“The figures serve as a reminder that heroin use remains at very high levels and that significant numbers of new people are beginning to use heroin every year,” said MQI. The charity said there continues to be evidence of a strong link between homelessness and drug use. More than one third of admissions to the Drug Treatment programme in Drumcondra were people who were previously homeless.


Shadow Northern Ireland secretary Shaun Woodward conference speech rapped

Shaun Woodward has been challenged to produce his own vision for Northern Ireland's economy after using his conference speech to attack plans for a corporation tax cut. Labour's shadow Northern Ireland secretary was branded "out of touch" after his speech in Liverpool slammed proposals for the tax cut, which many business leaders believe could help rejuvenate the local economy. Mr Woodward had branded the coalition's economic policies a "failing gamble" with a "careless impact" on public services, saying one in five young people here was unemployed.

The Executive is currently waiting on a Treasury decision on whether the power to set the rate will be devolved to Stormont. Political leaders here have backed the move, claiming that lowering the present 26% rate would enable the region to compete with the Republic, where the rate is 12.5%. But Finance Minister Sammy Wilson recently warned any future cut to the corporation tax rate would have to wait for at least four years. In his speech yesterday, Mr Woodward branded the cut a "huge gamble", warning of the impact of a block grant cut on the public sector.

But his remarks came in for heavy criticism from business leaders and political opponents. Glyn Roberts from the Northern Ireland Independent Retail Trade Association said it was time for Mr Woodward to spell out his alternative for kickstarting the economy. "If Mr Woodward doesn't agree with corporation tax then many people would be keen to see him spell out his alternative," he said.

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