Tina, plaintive Irish version

27 September 2010 By Ian Campbell

The emerald isle’s GDP fall is encouraging some to say the cuts are too savage. But that’s wrong. Ireland can’t do much to cut the cost of its bank bail out and turning to the EU would provoke panic. Public sector pay ballooned in the boom and must be cut. And growth will return.

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The Irish economy contracted in the second quarter having grown in the first, provisional estimates by the Irish statistical office show. Ireland's GDP fell by 1.2 percent in the second quarter having risen by 2.2 percent in the first quarter. In comparison with the second quarter of 2009, GDP was down by 1.8 percent.

The Moody's ratings agency cut Anglo Irish Bank's unguaranteed senior debt by three notches to Baa3 on Sept. 27 and its subordinated debt by six notches to Caa1 ahead of plans by the government to outline the total cost of bailing out the bank.

Brian Lenihan, Ireland's finance minister, said last week that it was "unthinkable" that Ireland should default on some of its bank debt. "I do not propose that the country becomes an experiment for default strategy," he said.

The Irish 10year government bond yield was trading on Sept. 27 at a yield of over 6.6 percent.

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