Wednesday, November 17, 2010

Ireland debt crisis

After some months calmness in markets a storm is starting to intensify. Few of the factors leading causing turmoil in markets are Ireland banking problems..unlike Greece debt problems but eventually will come there in some time in 2011. Korea increased interest rate to tame inflation and markets expect china may fallow the suit. and last but not least QE2 and its effects on currency war

Below are some links related to Ireland Crisis
Ireland's minister for European affairs, Dick Roche, hit the radio waves this morning, telling the Today programme that the situation is under control, and there's no need to panic:

"There is a problem with liquidity in banks, there is no doubt about that, but I don't think that the appropriate response to that would be for European finance ministers to panic.
"Ireland doesn't need to trigger any mechanisms because of sovereign debt and the problems in banks are being dealt with."
European Central Bank vice president Vitor Constancio has also been talking this morning, just before he headed off to Brussels. Constancio argued that Spain and Portugal might still be secure, even if Ireland does buckle. Quotes via Reuters:

Euro zone ministers meet to discuss Ireland's debt crisis

There is no necessary link in this respect. All situations are different from each depends of course on market developments, which cannot be predicted," he said.
"Several countries have been under some pressure from the markets, that is well known. But as you have seen, there are differences. The market really discriminates (between) the different situations that exist."

In the bond markets, the yield (or interest rate) on Irish government debt has leapt again to 8.542%, up from 8.17% overnight. That's a clear sign that the markets are more concerned about the possibility that Ireland will restructure its debt, or even default.

With Ireland's economic crisis centre stage, look at the characters involved in bringing Irish banking to its knees

This is a very interesting editorial in the FT, which says that the root of the problem in Ireland is the government’s total commitment to bank bondholders, which translates into a total risk for the taxpayer. Unless the Irish government changes that, its sovereign bonds will be under pressure.  

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