Nearly three years after losing access to the sovereign bond market, Ireland appears to have built sufficient momentum to escape the troika’s orbit. Come early 2014, the country will no longer be subject to its quarterly visits and binding targets. The government will have succeeded in its number one political objective: ‘regaining our economic sovereignty’. But, what will really change?
When Ireland was first bailed out, I and many others thought it unlikely that the country could succeed in regaining market access by end-2013. In mid-2011, with interest rates on Irish government bonds soaring into double digits, such a benign scenario looked ever more remote.
Then, things changed. Increasingly, Ireland came to be seen as a special case, different from the struggling ‘Club Med’ countries. Irish bond yields fell dramatically, decoupling from those of Greece and Portugal. New ECB President Mario Draghi signalled that he was willing to do ‘whatever it takes’ save the Euro. Ben Bernanke, his American counterpart, kept the printing presses running, doubling down on his so-called ‘quantitative easing’ experiment. No doubt, this ‘easy money’ helped Ireland’s cause. High profile financiers made multi-billion euro bets on Ireland’s recovery story, and are already sitting on massive paper profits. The Irish banks also got in on the act, racking up significant holdings of Irish bonds rather than lending to businesses or households. Internally, economic pain may be manifest, but externally the mood music has been mostly positive. Continue reading
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