Ireland, EU in Emergency Loan Talk; Greece Deficit Revised to 127% of GDP

Nigel Thomas
15 Nov, 2010
New York City

Ireland and peripheral nation in the EU remained in focus ahead of EU officials meeting in Brussels tomorrow. Ireland is expected to receive as much as 100 billion in loans and guarantees as early as this week in a plan coordinated by the EU and the IMF. Eurostat revised deficit estimates of Greece.

[R]1:00 PM Frankfurt - Ireland and peripheral nation in the EU remained in focus ahead of EU officials meeting in Brussels tomorrow. Ireland is expected to receive as much as 100 billion in loans and guarantees as early as this week in a plan coordinated by the EU and the IMF. Eurostat revised deficit estimates of Greece.[/R]

European markets were on the decline as sovereign debt yields of Ireland, Portugal and Greece were on the rise.

Though the officials in Ireland continue to deny that there is a “crisis” and the government needs external support, but 123jump.com sources within the EU in Brussels and the IMF in Washington, D.C. indicate an emergency bailout plan of at least 50 billion euros is in the works.

The EU-IMF led coalition is expected to offer as much as 100 billion euros in loans and guarantees as early as this week to calm bond markets. EU ministers and officials and ECB officials are scheduled to meet tomorrow in Brussels to hash out the preliminary plan of the bailout.

Ireland sovereign debt yield increased to 8.17% and the euro declined 0.3% to $1.363. The yield premium of Portuguese 10-year bond to German bonds increased to 482 basis points.

A sharp decline in property market has battered the balance sheets of Irish banks and banks have come to rely on funding from the European Central Bank.

Irish finance ministry spokesperson in a statement said that the government is “full funded till well into 2011” and has made “no application for an external support.”

German Chancellor Angela Merkel has said in the past that investors should participate in future rescue efforts and the Bundesbank President Axel Weber asked the European Central Bank to stop buying bonds from heavily leveraged nations like Greece, Portugal and Ireland.

Euro-zone September Surplus

First estimate of the Euro zone trade balance in September with rest of the world was €2.9 billion deficit compared to €1.4 billion a year ago month. First estimate for the wider EU27 trade balance in August was €11.7 billion deficit.

Euro Area government deficit to GDP ratio increased from 2.0% in 2008 to 6.3% in 2009 and in the EU27 from 2.3% to 6.8%. Euro area government debt to GDP ratio increased from 69.8% at the end of 2008 to 79.2% at the end of 2009, and in the EU27 from 61.8% to 74.0%.

The statistics office of the region also revised Greece’s budget deficit to 15.4% from 13.6% in the estimate released in April. The debt of the nation was also revised sharply higher to 126.8% of GDP.

After the revisions released by the eurostat today, the Greek Finance Ministry said that debt is expected to soar to 144% of gross domestic product and budget deficit will declined to 9.6% in the current year.

As a part of the emergency loan arranged by EU-IMF, Greece agreed to lower its but deficit to meet the EU requirement of 3% by 2014 and agreed to spending cuts, pension cost and increase government revenue with better tax collection.