Belfast Telegraph

Irish bonds 'at risk from Greek-style restructure'

By Dara Doyle

Irish government bonds are still vulnerable to a Greek-style restructuring, Capital Economics has warned.

The country still hasn't fully regained the competitiveness lost inside the euro region and remains vulnerable to swings in the global economy, said Jonathan Loynes, chief European economist at Capital Economics. Debt levels, the housing market and a fragile banking sector may also hamper economic growth,he added in a note to investors.

"Worries about its economic outlook or contagion effects from other troubled peripheral economies could yet re-ignite market pressures and force the Irish government to turn again to outside help," Mr Loynes said. "There is even a risk that Ireland will ultimately need to undergo a Greek-style debt restructuring, perhaps putting its future inside the currency union in jeopardy.

"Bringing all of the evidence together, it is clear that Ireland deserves a lot of credit for the improvement in its economic performance over recent years," Mr Loynes said. "But there are good reasons to doubt that Ireland has yet found a way out of the eurozone's crisis."

The comments are gloomier than those from many other observers. Moody's said three months ago that the chances of Ireland having to restructure any of its debt were very remote after it cut the eurozone struggler's sovereign rating by two notches to the verge of junk status on Friday.

Belfast Telegraph