Belfast Telegraph

Minister in Republic denies need for standby bailout fund

The Republic's Finance Minister Michael Noonan has dismissed talk of Ireland needing a second bailout adding that the country is fully funded up to the end of 2013.

"It's ludicrous to be talking about a second bailout," he said yesterday ahead of the Dail resuming after the Christmas break.

He was responding to suggestions by Citigroup chief economist Willem Buiter that Ireland should negotiate a second standby bailout from the EU/IMF/ECB troika.

Mr Buiter, who is a former member of the Bank of England's monetary policy committee, said it didn't make "good business sense" to be borrowing at interest rates of 8% when bailout loans come with a 3% tag.

While Ireland is currently priced out of the open markets, if it returned to the bond market now, the cost of borrowing would be around 8%.

"We're a year into the rescue programme which was negotiated by the previous government and we're fully funded until the back end of 2013," the Finance Minister added.

Mr Noonan's comments echo those of the European Commission, which yesterday described Mr Buiter's suggestion as "not particularly helpful".

Ireland is planning to dip its toes into the bond market at the end of this year and to return to the market in 2013.

Meanwhile, it has emerged that the US Treasury was concerned that the Irish bailout could be derailed by poor growth and the Government's inability to spend.

Confidential documents released to RTE News by the US Government disclose US Treasury Secretary Timothy Geithner used a meeting with Finance Minister Michael Noonan to assess domestic threats to the bailout.

Mr Geithner was acutely aware of the allegations that he had personally halted plans to burn Irish bank bond holders, according to the documents.

He had two separate meetings with Taoiseach Enda Kenny and Mr Noonan last year to assess the risks "both domestic and external" to the bailout.

Briefing notes record that officials were aware that the bailout success depends on export growth and they encouraged Mr Geithner to press Mr Noonan on how the Irish economy could grow when its main trading partners were also in recession.

They had questions on how the government planned to finance the banking system and the notes told Mr Geithner to expect questions from Mr Noonan about his contact with the IMF over vetoing plans to burn the bondholders.