The Irish Minister for Finance, Brian Lenihan, says the recent surge in borrowing costs for some countries suggests there is a concerted attack on euro zone nations, warns reporters of a cosy cartel operating amongst economists and claims that the underlying trends indicates a remarkable turnaround for the Irish economy.
“There is a concerted attack on the euro zone, there is a concentration on weaker countries.”
Brian Lenihan
Ireland will counter a concerted attack that is threatening the euro zone by bringing its finances in order helped by a “remarkable turnaround” in the economy, the finance minister told reporters in Dublin on Friday as he criticized journalists for overstating Ireland’s economic difficulties.
Minister for Finance Brian Lenihan criticized some journalists for overstating Ireland’s economic difficulties to the detriment of the country, speaking at a conference in Dublin Friday, the Irish Times reports.
At a conference titled “Confidence in the Media” Mr Lenihan said while most reporting had been fair, journalists needed to be aware of the self-fulfilling nature of any “doomsday scenarios” they wrote.
Journalists could undermine or promote confidence in the economy, the Irish minister stated as the price of insuring Irish government debt rose to all time high with a CDS spread of more than 500 basis points.
Climate of Fear
He acknowledged there was a “climate of fear” about the impact of financial markets on the economy, the loss of jobs and the stability of the banking system.
A crucial element in dispelling fear was the provision of accurate, reliable and balanced information, he lectured the professional media workers in Dublin.
“There is a tendency to paint black-and-white pictures, to overstate difficulties, to use sometimes emotive language. And God knows, our problems are bad enough without exaggerating the reportage to present doomsday scenarios,” he said.
Adding that he did not agree with those who claimed the media did not report enough good news.
It is facile to expect reporters to engage in “national back-patting,” he said, and that journalists have to be skeptical in their treatment of stories.
Cosy Cartel of Economists
However, skepticism should not be reserved just for government, or political parties, and the same rigor should be applied to the reporting of interest groups and representative bodies.
Agendas were not exclusive to politicians and governments, and many interest groups had better communication resources than political parties, the Irish minster informs. Adding that a “cosy cartel” is operation amongst economists, whereby they do not go head to head or disagree in public.
Euro Zone Under Attack
Ireland will counter a concerted attack that is threatening the euro zone by bringing its finances in order, helped by a “remarkable turnaround” in the economy, the finance minister also told the media as the premium investors demand to hold 10-year Irish bonds rather than German Bunds rose to a new euro lifetime high of 451 bps, a day after a surprise fall in Ireland’s Q2 GDP posed a new threat to Dublin’s fiscal consolidation efforts.
Lenihan says Ireland will do its utmost to defend the euro currency from the market attack which he said was manifested in “disturbingly” high yields demanded for its bonds at sales on Tuesday.
According to Reuters (Dublin) the finance minister told reporters on the sideline of the conference:
“There is a concerted attack on the euro zone, there is a concentration on weaker countries.”
A Remarkable Turnaround
Data published Friday showed that the Irish economy contracted by 1,2% in the second quarter of 2010, and that growth in the first quarter was less than previously estimated.
In recent weeks the extra yield investors demand to hold Irish bonds over German bunds has surged to record highs due to investor concern about the State’s ability to manage the cost of its bank bailout and reduce the budget deficit.
However, according to Mr. Lenihan, undeterred by the data, the underlying trends indicates a remarkable turnaround for the economy.
“Exports are growing. New order books are expanding and business confidence has improved markedly since last year. Tax revenues are stabilizing, public expenditure is under control and our budget deficit will shrink next year,” Lenihan says.
Read also: The big gamble: The inside story of the bank guarantee
Question Of The Day
Now, here’s the Econtwist’s Question of The Day:
Who is best at producing conspiracy theories?
A: Politicians?
B: Journalists?
C: Even?
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EconoTwist's 
Bailing Out Ireland – The Inside Story
A financial aid plan to help Ireland cope with its battered banks will be unveiled next week, EU sources says on Friday, but experts warns that a rescue may not be enough to prevent contagion in the single currency bloc. Still, the Irish government is hesitating.
“As long as the fundamentals don’t improve, the pressure will continue on other countries too.”
Daniel Gros
The euro rose and the risk premium investors demand to buy Irish and other peripheral euro zone debt – instead of benchmark German bonds – narrowed Friday as a sign of optimism that an aid deal for Dublin will be sealed soon.
But a poll of participants at a high-level banking congress in Frankfurt showed that nearly three-quarters believed the crisis that has shaken the euro zone for a full year would rage on even after an Irish rescue and ensnare other financially weak countries such as Portugal. Reuters reports.
“As long as the fundamentals don’t improve, the pressure will continue on other countries too,” Daniel Gros, heads of the Center of European Policy Studies, says in an interview with Reuters Insider TV.
“The problem is that no problems are currently being solved. Many believe that the euro zone is just moving from one crisis to the next.”
Ireland’s central bank chief has acknowledged that the country needs a loan running into the tens of billions of euros to shore up an extremely fragile banking sector that has grown dependent on ECB funds.
Time Is NOT On Your Side
Reflecting concerns among other euro zone periphery countries that Ireland’s financial troubles could spread, Greece’s finance minister, George Papaconstantinou. is pushing Dublin to move fast.
“We are now at a point where decisions have to be taken,” he told bankers at a congress in Frankfurt. “Time is of the essence.”
Sources tell Reuters that Ireland may need assistance of between 45 billion and 90 billion euros, depending on whether it needs help only for its banks or for public debt as well.
So why is the Irish government dragging its feet? Is it so embarrassed or fearful of risking sovereign control?
Or – is Ireland in fact in a position to reject an aid package from the EU or is it simply buying time?
Al Jazeera have just released this report, talking to Jim Rogers, among others:
.
Fitch Comments On Irish Crisis
“As previously stated, Fitch Ratings says that its current Ireland sovereign rating of ‘A+’ with a Negative Outlook is premised on the Irish government’s commitment to fiscal consolidation, its strong liquidity position, improving external accounts and the measures it had taken to restructure the Irish banking system,” the agency writes in a statement.
Adding: “However, it is now evident that the actions taken in September have not succeeded in restoring confidence in the banking sector. Despite substantial injections of public capital into Irish banks and the extension of the issuance window for bank guarantees, Irish banks have been struggling to secure market funding and rollover existing debt, rendering them almost wholly reliant on ECB and Central Bank of Ireland liquidity support – some EUR130 billion and EUR35 billion respectively according to the latest available figures.”
While losses from commercial real estate lending appear to have been fully recognised with the transfer of related assets to NAMA (National Asset Management Agency) and additional capital injections into Irish banks announced on the 30 September, there is considerable uncertainty over the potential for further bank losses on other assets, including from residential mortgage lending, Fitch points out.
Official estimates suggest around 10% of residential mortgages are either in arrears or have rescheduled and continue to rise, though more positively, repossession rates remain relatively low.
To underpin continuing financial support for the banking sector and further measures to restore confidence, the Irish government is expected to agree an external financial support package with the EU and IMF in the near future.
“Fitch will review Ireland’s sovereign ratings in the light of any package agreed with the IMF and EU. The outcome of such a review will be influenced, amongst other factors, by the financial terms of any assistance provided and their fiscal implications; the agreed policy programme; and the likelihood that it would allow Irish banks and in particular the government to regain access to market funding at an affordable cost,” David Riley, Fitch’s Group Managing Director, writes.
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