Ireland Boosted By EU Bailout Fund Deal

Could Ireland be the biggest winner from last week’s European summit? If the price of its bonds is any guide, investors seem to think so, the Financial Times reported. The country’s financial markets have enjoyed a sharp turnround since the middle of last year, switching from one of the worst performing markets in the wake of its 2010 bail-out to one of the best. The EU summit agreement, which allows the European Stability Mechanism, the eurozone’s new rescue fund, to invest directly in troubled banks, has provided a further boost. Indeed, Irish long-term borrowing costs fell below those of Spain for the first time since February 2009 after the statement as hopes grew that the plan would break the so-called “vicious circle” between banks and sovereigns that is at the heart of Europe’s debt crisis. “This is a game changer for Ireland without a doubt, assuming that the interpretation is correct that this removes the bank liabilities from the Irish sovereign to the eurozone as a whole,” says John Stopford, head of fixed income at Investec Asset Management. “If this is the case, then Ireland is the biggest winner from the EU’s latest announcement to tackle the crisis.” Other big fund managers, such as Pimco, agree the summit may be a positive turning point for Ireland, though they say it is too early for a definitive assessment. Dublin has so far pumped €64bn into its banks in what ranks as one of the world’s worst ever financial crises. The Irish government is now pushing to have as much of this debt retrospectively shifted from the shoulders of Irish taxpayers on to the shoulders of European taxpayers by attracting investment from the ESM. Read more. (Subscription required.)