Noonan Presses for Backstops as Ireland Nears Bailout Exit
Irish Finance Minister Michael Noonan pressed the nation’s bailout partners to present “a menu of options” to smooth the government’s exit from the rescue program this year.
The troika of the International Monetary Fund, the European Commission and the European Central Bank are due to present a paper on potential transition arrangements “in the next week or so,” Noonan said in an interview with Francine Lacqua for Bloomberg Television today in Davos, Switzerland.
“Backstop arrangements, which one mightn’t have to use but which would reassure the market, would be one of the strategies we’d be interested in,” he said. “We’d like to see a range of options and then take advice on the ones that would best suit our circumstances.”
Ireland stepped out of international bond markets and sought a 67.5 billion euros ($90 billion) three-year bailout program in 2010 as its banking system came close to collapse. Last year, Noonan raised the possibility of a precautionary credit line being provided to the government as it makes a full return to international markets.
“It’s not an issue of being in the markets, it’s an issue of at what price,” said Noonan. “We don’t want to go back into the market and fall back out of it again.”
Ireland sold 2.5 billion euros of bonds on Jan. 8, priced to yield 3.316 percent. That’s less than the average 3.5 percent on the nation’s aid package.
The yield on Ireland’s benchmark security due in October 2020 was at 4.15 percent today, down from 14 percent in July 2011.
“We’ve been testing the market with treasury bills and with bonds with short term maturities of four or five years,” he said. “Later in the year we’ll go for longer bonds.”
As it nears the bailout exit door, the government is also seeking relief on it banking debt. Irish bonds rallied and the nation first returned to long-term international credit markets after European leaders agreed in June to break the link between sovereign debt and banks.
“We expect to exit our program in 2013,” Prime Minister Enda Kenny said at a panel discussion in Davos. “ We can’t do it without the cooperation of what’s been committed of our European colleagues.” Bank debt “has been a crushing burden on the people of Ireland.”
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