|Irish Debt Crisis Over?|
On Sunday, Bloomberg News reported that Ireland has applied for a bailout to help fund itself and save its banks, becoming the second euro member to seek a rescue from the European Union and the International Monetary Fund. They reported that Irish Prime Minister Brian Cowen said he expects talks on the package to be completed in the “next few weeks.” The loan is expected to be less than 100 billion euros ($137 billion).
The expected 'bailout' follows two years of budget cuts in Ireland that failed to restore market confidence and the cost of saving the financial industry soared. After Irish bond yields rocketed in the past month, European authorities pushed Ireland to seek aid to prevent the crisis that began in Greece this year from spreading to other euro-area countries such as Portugal.
Dr. David Krause, AIM program director said, "Similar to the Greece crisis in the spring, the Irish bailout package is likely to only address the short-term. I think it won’t solve the longer-term issue of fiscal sustainability of Ireland. The bondholders of Irish LT debt will still be vulnerable. Nevertheless, the news cycles are so short this week that I believe most financial reporters will conclude that the Irish crisis is over and we'll move on to the next story."
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|Dr. David Krause|