Who is listening to Enda Kenny?May 30th, 2011 | By Ian Poulton | Category: Ireland
Leo Varadkar yesterday warned that Ireland would need a second bailout. ‘Not at all’, says Enda Kenny, ‘everything is going well’. There will be no need for a second bailout; Ireland will even be able to borrow money on the international markets late in 2012 according to Michael Noonan. Presumably, they believe people will believe them, unfortunately the international money markets do not.
Since the Fine Gael- Labour Coalition gained power, rather than improving things have actually become progressively worse. Perhaps there was an expectation that the new government would dump the policies of its predecessor, but instead of improving, the status of Ireland in the financial markets has deteriorated; the bond spread, the amount by which we must pay more than the Germans to borrow money has worsened by the week.
At Easter, if one checked the ‘Financial Times’, the table of the ‘spread’ of the bonds of various countries against those of Germany showed Ireland had a spread of 7.4%. What that meant in plain language is that while Germany could borrow on the international markets at 3.27%; Ireland would have had to pay 7.4% more – 10.67%.
The plain language is even more bleak as another month draws to a close. Check today’s table of bond spreads and it shows that the Germans can borrow at 2.98%, while in Ireland the figure has increased to 11.36%. If we were seeking to borrow new money we would have to pay 8.38% more than Germany. Whatever the Taoiseach may say about Ireland being on course, the financiers do not believe it is on course to recovery.
The Taoiseach does not need to resort to exotic publications like the ‘Financial Times’ to discover that his policies are lacking credibility, if he referred to his own National Treasury Management Agency, the body in which he today declared he trusted, he would see a similar bleak picture. The NTMA publish daily reports on government bonds, reports available to anyone who clicks on the website links. Today’s report shows that the yields on Irish Government bonds range between 9.93% and 11.72%. Having to go into the international money markets and offer over 10% on government bonds at a time when the economy is stagnant would place an even more unsustainable burden upon the country.
Any Leaving Cert economics student could do the sums; the more we have to pay for the bankers’ debts, the more that is taken in taxes and cuts, the less money is in the system, the less demand there is for goods and services, the more the economy stagnates.
Standing with a farmer in a field in Co Laois yesterday afternoon, he pointed out that Leo Varadkar was only saying what made sense. “Why didn’t the Government listen to that McWilliams man who spoke at the harvest festival?’ he asked.
‘I don’t know’, I said, ‘I don’t know’.
The one thing I do know is that the bond spread shows that the markets are not listening to the Taoiseach.