October 27, 2011
Greece’s difficulty paying its debts may turn out to be Ireland’s opportunity.
Greece’s failure to cut spending and boost revenue by enough to meet targets set by the European Union and International Monetary Fund prompted bondholders to accept a 50 percent loss on its debt. While Ireland won’t seek debt discounts, the government might pursue other relief given to Greece, including cheaper interest payments on aid and longer to repay it, according to a person familiar with the matter who declined to be identified as no final decision has been taken.
“There’s a political problem for the government,” said Gavin Blessing, a bond analyst at Collins Stewart Plc in Dublin. “The Greeks, who are seen to be behaving badly, get rewarded, whereas the Irish, the top boys in the class, get nothing.”
While Irish bonds delivered the world’s best returns during the past three months, they have pared gains on concern slowing economic growth worldwide will derail the government’s efforts to revive the country’s fortunes through exports. The yield on debt due in 2020 rose 74 basis points in October to 8.37 percent yesterday, albeit down from 15.5 percent in July.
Ireland was the second euro member to need a bailout and Prime Minister Enda Kenny is ruling out reneging on its bonds. Yet, he said this week he’s pushing his European partners for alternative ways of reducing Ireland’s “crushing” debt.
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