European Debt Crisis

How bad is Ireland’s fiscal situation?

Stephen Beard Sep 30, 2010
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European Debt Crisis

How bad is Ireland’s fiscal situation?

Stephen Beard Sep 30, 2010
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TEXT OF INTERVIEW

STEVE CHIOTAKIS: The Irish finance minister said today his country’s public finances are “horrendous.” He made the claim while announcing how much
a huge bank bailout in Ireland could cost. Marketplace’s Stephen Beard is with us live from London to talk about the plan. Hi Stephen.

STEPHEN BEARD: Hello Steve.

CHIOTAKIS: So the finance minister says “horrendous.” How bad is the Irish fiscal situation?

BEARD: It’s “horrendous.” He’s right. Bailing out the Anglo Irish Bank and other lenders hit by Ireland’s property crash could wind up costing the Irish taxpayers more than $60 billion — a very big sum for a small economy. The Finance Minister Brian Lenihan admits this could push Ireland’s budget deficit this year an astonishing 32 percent of GDP — 32 percent. But Lenihan says there’s no alternative to the bailout. If, for example, a bank the size of Anglo Irish went bust, it could bring down the whole Irish economy. Lenihan says this bailout sum is huge, but he’s confident it will work.

BRIAN LENIHAN: It is a manageable figure. And it does ensure that our banking system, the crisis in our banking system caused by reckless lending earlier in this decade is finally resolved and dealt with.

CHIOTAKIS: Now, Stephen, that optimism aside, the situation in Ireland is pretty bad, but how does it compare with the rest of Europe?

BEARD: Well the Irish deficit will be the worst in Europe this year, no doubt about that. But it’s pretty clear that other countries in the eurozone are looking pretty sickly too. Moody’s, the credit rating agency, downgraded Spain’s credit ratings today, down a notch from the top rating. Moody’s cited Spain’s low economic growth rate as a factor. And accounting firm Ernst & Young has produced a gloomy report on the eurozone as a whole. It’s predicting low growth and high unemployment. And it says given the banking problems in countries like Ireland, it’s still possible that a eurozone country could default and that the single currency, the euro, could break up.

CHIOTAKIS: All right. Marketplace’s Stephen Beard in London. Stephen, thanks.

BEARD: OK Steve.

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