Irish Consumer Confidence Plunges as Fiscal Problems Spark `Great Panic'
Irish consumer confidence plunged the most in more than four years last month as the mounting burden of bailing out Anglo Irish Bank Corp. and surging sovereign borrowing costs sparked a “great panic.”
The household sentiment index fell to 52.4, the lowest in a year, from 61.4 in August, KBC Ireland and the Economic & Social Research Institute in Dublin said in a statement today. A gauge of consumers’ expectations dropped to 37.9 from 52.1.
Finance Minister Brian Lenihan said last month he may have to pump extra cash into Anglo Irish, raising the cost of repairing the financial system to as much as 50 billion euros ($69 billion). Ireland’s deteriorating finances fueled investor concern that it would become the first nation after Greece to tap the 750 billion-euro rescue fund set up by the European Union and International Monetary fund to stanch the debt crisis.
“Ireland has experienced a great panic,” said Austin Hughes, chief economist at KBC Ireland. There is a “risk that a sense of apocalyptic gloom may trigger a freeze in spending.”
The measure of how consumers view their current situation fell to 73.8 from 75.3 in August, KBC said. Households have become more pessimistic about the outlook for the economy, employment and their personal finances, it said.
Lenihan will publish a four-year plan next month that aims to narrow the country’s budget deficit to below the European Union limit of 3 percent of gross domestic product by the end of 2014. The shortfall this year, excluding bank bailouts, will be about 11.9 percent, Lenihan said last week.
“The key task for policy makers is to show clearly how painful adjustments can be managed,” Hughes said. “By outlining a clear and credible path out of current difficulties, there is a greater prospect that consumers will take the view that their future is not quite as dark as it has seemed.”
To contact the editor responsible for this story: Colin Keatinge in London at Ckeatinge@bloomberg.net