Off the wire
• Botswana has no plan to send troops to Nigeria: official  • German economy overcomes headwinds faster than expected: central bank  • LME base metals declined on Monday  • Interview: Premier Li's Swiss visit to boost bilateral ties to new level: ambassador  • Arab Israelis to strike after deaths of Bedouin Arabs in clashes with police  • China's energy giant willing to cooperate in Arctic resources extraction  • 3 Pakistani soldiers, 7 militants killed in clashes  • Minister retracts statement made about mothers of missing persons in Kosovo  • News Analysis: Somali PM faces huge task to form a cabinet accepted by parliament  • Russia slams European TV for biased coverage of Ukraine crisis  
You are here: 　 Home

Ireland's bailout program has several flaws: central bank chief

Xinhua, January 20, 2015 Adjust font size:

The joint European Union (EU)-International Monetary Fund (IMF) bailout program had a number of flaws, which placed an additional debt burden on Ireland, Central Bank of Ireland chief Patrick Honohan said on Monday.

"As designed in November 2010, the EU-IMF program of assistance was acknowledged to be one that lacked a strong probability of success. This was the view of the IMF staff, and it was also the view of the Irish staff negotiating the program," Honohan said at an IMF conference at Dublin Castle.

"Three elements in particular were lacking," he said, naming the problems as the interest rate being too high, considering the starting debt-to-GNP ratio; the high tail risks associated with the loan portfolio of the banking system not being addressed with an efficient instrument; and the speed of the required bank deleveraging risked imposing substantial fire sales of assets, which would add to the losses of the government.

"Accordingly, the risk was high that, at the end of the three years of the program, the indebtedness of the government, taking account also of the servicing costs of that indebtedness, would be too high for the government to have access to the market at any reasonable terms, and would give rise to the need for a second program and a prolonged period of uncertainty," said Honohan.

But Honohan said he shared the assessment that the program had been a "significant success," without which "the well-being of the people of Ireland would be very much lower than it is today."

Ireland was one of the countries hardest hit by Europe's debt crisis. It accepted a bailout in 2010 when its banking and economic crises threatened to destabilize the euro currency.

The bailout for Ireland included loans from the EU and member states amounting to 45 billion euros (about 52 billion U.S. dollars), as well as a 22.5-billion-euro line of credit with the IMF.

In December 2013, Ireland became the first of the eurozone bailout countries to complete its bailout program. Enditem