Ireland

Jean-Claude Trichet, right, with the parliament's economic committee chair, Sharon Bowles

The troika of bailout lenders has not been getting much love at the European Parliament’s ongoing inquiry into its activities in recent weeks. But the criticism is not just coming from MEPs in the throes of election fever. Predictions of the troika’s demise have come from some unexpected quarters, including current and former members of the European Central Bank executive board.

During the hearings, MEPs have particularly criticised the troika — made up of the International Monetary Fund, European Commission and the ECB — for its overly optimistic growth forecasts for bailout countries, which have been repeatedly revised downwards. Perhaps unsurprisingly, they have also suggested that the troika be subject to greater parliamentary oversight.

Hannes Swoboda, the Austrian social democrat who heads the centre-left caucus in the parliament, went further, saying the body is undemocratic, hostile to social rights and that the EU would be better off without it. Read more >>

Mario Draghi, left, stands next to Noonan at last week's finance ministers' meeting

Given the eurozone crisis has, for more than a year, failed to seriously rankle the financial markets, those of us still preoccupied with its aftermath and how it is changing Europe can occasionally feel like a small band of obsessives offering up Talmudic pronouncements of interest to a dwindling number of fellow crisis junkies.

But occasionally one of those textual debates rises to the level of importance that’s worth the attention of a broader audience. And one of those occasions seems to have occurred over the last couple of weeks regarding Ireland and the European Central Bank’s bond-buying programme, known as Outright Monetary Transactions (OMT).

For those who haven’t been following this obsessively, the discussion is important because most officials and market analysts credit OMT with, essentially, ending the hair-on-fire phase of the eurozone crisis last year. Read more >>

Ireland's Enda Kenny, left, and Germany's Angela Merkel meeting last year in Berlin

With just over a month of funding left in Ireland’s €67.5bn three-year bailout, Irish prime minister Enda Kenny sent a subtly-worded letter to his fellow EU leaders as they gathered in Brussels today for their two-day summit.

At first glance, the letter (we’ve posted a copy here) seems to simply repeat messages that Kenny has made in the past: he’s weighing whether to request a line of credit after they exit the bailout; he wants quick completion of the eurozone’s “banking union”; he continues to hit his bailout targets.

But a closer read between the lines shows a more complicated game going on. In essence, Kenny is reminding other leaders they have failed to live up to promises made to Ireland last year that would have significantly lowered the Dublin’s sovereign debt levels. An annotated look at the letter after the jump.

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Ireland’s recent history is a story of hopes dashed. Hope is now being stoked again, not least by those with the most interest in being positive: the Irish government and European lenders.

For Europe, Ireland is the poster child for austerity and must, just must, be recovering. Some positive jobs figures, showing the first growth in employment since 2008 (on which more later) have prompted what passes for elation in the depression-hit island.

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Finance ministers MIchael Noonan of Ireland, center, and Vito Gaspar of Portugal, right, with the EU's Olli Rehn at January's meeting.

After Greece last year won a restructuring of its €172bn rescue that included an extension of the time Athens has to pay off its bailout loans, Ireland and Portugal decided they should get a piece of the action, too.

So at the January meeting of EU finance ministers in Brussels, both Dublin and Lisbon made a formal request: they’d also like more time to pay off their bailout loans. According to a seven-page analysis prepared for EU finance ministry officials a few weeks ago, though, the prospect is not as straight forward as it may seem.

The document – obtained by the Brussels Blog under the condition that we not post it on the blog – makes pretty clear that while an extension might help smooth “redemption humps” that now exist for Ireland (lots of loans and bonds come due in 2019 and 2020) and Portugal (2016 and 2021), it’s not a slam dunk case. Read more >>

Over the course of the eurozone crisis, the relationship between EU leaders and credit-rating agencies has been, at best, a love-hate one, with officials frequently lashing out at the three major sovereign raters for the timing and severity of their downgrades.

So it was probably with some Schadenfreude that those same officials learned of the news that the US Justice Department will soon file a civil suit against Standard & Poor’s – arguably the most prominent of the rating agencies – for misleading investors when it gave gold-plated endorsements to US mortgage-related securities before the 2008 financial crisis.

But what happens when S&P starts pointing out that some of the most criticised eurozone policies – the austerity measures aimed at forcing internal devaluations in struggling peripheral countries – may be working? The silence thus far has been deafening. Read more >>

Ireland's Kenny, right, with European Commission chief Barroso at start of the Irish EU presidency.

Ireland appears to be taking advantage of the comparatively positive sentiment in the eurozone that has marked the start of the year by moving back into the bond markets in a major way.

Last week, Dublin raised €2.5bn by issuing additional five-year government bonds, and then days later was able to convince private investors to buy €1bn in debt it holds in one of the largest banks nationalised at the peak of its banking crisis. This morning, the government was at it again, announcing a €500m auction in short-term t-bills will take place tomorrow.

Despite the winning streak, there’s still a lot of nervousness in official circles about whether Ireland can fully emerge from its bailout when its €67.5bn in rescue loans run out in November. All this has led to a debate in Dublin about whether Ireland should seek additional aid, such as a line of credit from the International Monetary Fund or the EU – which would be backed by the European Central Bank’s new limitless bond-buying programme – to provide a backstop to new Irish bonds.

The Irish website TheStory.ie got its hands on the new European Commission report on the Irish bailout, which makes clear on page 44 that Dublin is in discussions with the troika about whether the ECB’s bond-buying programme – known as Outright Monetary Transactions – can be accessed: Read more >>