Ireland’s debt fuels Euro health fears
(1st October 2010 – Europe) The Irish government has announced a mammoth bailout for several of the troubled nation’s banks, sparking new fears about Europe’s financial health.
The government has revealed plans to inject as much money as the country expects to collect in tax revenue over the next year and a half into Ireland’s banks, forcing it to record a budget deficit equating to 32 per cent of GDP- a postwar record among Western nations.
To afford it, the government said it is must make additional cuts and impose fresh taxes at a time when the Irish economy is already slouching back into recession.
Dublin has previously imposed broad austerity, cutting pay for state workers and a wide range of benefits, including assistance for the blind.
The country offers perhaps the most extreme example of the risks being faced by developed countries as they try to both nurture a recovery and tame historic levels of public debt.
The drive to reduce government deficits has taken hold throughout Europe and the United States, but the IMF suggested Thursday that those efforts may undermine economic growth to a far greater degree than thought.
On Thursday, Irish officials said the tab for bailing out Anglo Irish Bank alone could reach €29 billion (A$47 billion). But they surprised financial observers by also announcing billions more to bail out two other banks, including Allied Irish Bank, in which the government might now take an 85 percent stake.
Michael Dicks, chief economist of Barclays Wealth, said that the nation’s now approaching the point where Greece was before its problems blew up and it remains to be seen whether today's measures draw a line under it.
To afford it, the government said it is must make additional cuts and impose fresh taxes at a time when the Irish economy is already slouching back into recession.
Dublin has previously imposed broad austerity, cutting pay for state workers and a wide range of benefits, including assistance for the blind.
The country offers perhaps the most extreme example of the risks being faced by developed countries as they try to both nurture a recovery and tame historic levels of public debt.
The drive to reduce government deficits has taken hold throughout Europe and the United States, but the IMF suggested Thursday that those efforts may undermine economic growth to a far greater degree than thought.
On Thursday, Irish officials said the tab for bailing out Anglo Irish Bank alone could reach €29 billion (A$47 billion). But they surprised financial observers by also announcing billions more to bail out two other banks, including Allied Irish Bank, in which the government might now take an 85 percent stake.
Michael Dicks, chief economist of Barclays Wealth, said that the nation’s now approaching the point where Greece was before its problems blew up and it remains to be seen whether today's measures draw a line under it.
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