Ambrose Evans Pritchard of the Telegraph lists the negative market reaction to the Irish deal. He also notes that the Irish people have finally been stirred out of their extraordinary complacency. People took to the streets even thought the march was organised by the trade union ICTU. Many Irish feel that the trade unions were partly complicit in supporting the disastrous taxation and pay policies as Social Partners that fed the boom and led to the bust. Jack O’Connor ICTU general secretary was booed as he spoke. Hecklers asked how much he is paid. Most top Trade Union officials pay was linked to that of top civil servants – his pay was €124,000 last year.
Market Reaction…
Spreads on Italian and Belgian bonds jumped to a post-EMU high as the sell-off moved beyond the battered trio of Ireland, Portugal, and Spain, raising concerns that the crisis could start to turn systemic. It was the worst single day in Mediterranean markets since the launch of monetary union.
The euro fell sharply to a two-month low of €1.3064 against the dollar, while bourses slid across the world. The FTSE 100 fell almost 118 points to 5,550, while the Dow was off 120 points in early trading.
“The crisis is intensifying and worsening,” said Nick Matthews, a credit expert at RBS. “Bond purchases by the European Central Bank are the only anti-contagion weapon left. It needs to act much more aggressively.”
Investor reaction comes as a bitter blow to eurozone leaders, who expected the €85bn (£72bn) package for Ireland agreed over the weekend to calm “irrational markets”.
While the Irish rescue removed the immediate threat of “haircuts” for senior bondholders of Irish banks, it leaves open the risk of burden-sharing from 2013 on all EMU sovereign bonds and bank debt on a “case-by-case” basis. Traders said bond funds have been dumping Club Med bonds frantically to comply with their “value-at-risk” models before closing books for the year.
Yields on 10-year Italian bonds jumped 21 points to 4.61pc, threatening to shift the crisis to a new level. Italy’s public debt is over €2 trillion, the world’s third-largest after the US and Japan…
Local Reaction…
….In Dublin, Fine Gael, Labour and Sinn Fein have all vowed to vote against the austerity budget in early December, raising doubts over whether the government can deliver on its promises to the EU.
Echoing the national mood, Sinn Fein leader Gerry Adams said it was “disgraceful” that the Irish people should be reduced to debt servitude to foreign creditors of reckless banks. “The costs of this deal to ordinary people will result in hugely damaging cuts,” he said.
One poll suggested a majority of Irish voters favour default on Ireland’s bank debt. Popular fury raises the “political risk” that a new government elected next year will turn its back on the deal. (link to full article)
