Ireland ‘benefiting’ from Greek debt crisis

Ireland is surprisingly benefiting from the Greek debt crisis, with the weaker euro against its major UK and US trading partners instead providing a significant economic boost, experts say.

The claims come as the countdown continues towards Greece either failing to meet a significant debt repayment next week or striking a last-minute deal with its official creditors, the IMF and the EU.

But even if Greece were to repay the IMF a €302.8m loan by June 5, the hugely indebted country then faces a series of repayment demands through July 13 for more individual loans that date back to its original bailout in 2010.

There is no let-up either in the debt demands. The country faces a repayment schedule from the IMF that starts up again in September and stretches through to late December.

Many economists believe that the EU and IMF will need to agree some sort of debt-relief deal because Greece’s debt is so elevated. Eurostat figures showed the country owed €318bn, equivalent to 177% of its GDP, at the end of last year, making it among the most indebted developed economies in the world.

In comparison, Ireland was ahead of Portugal as the third most indebted EU country last year, with gross debts of €203bn, or 110% of GDP.

Analysts say Ireland has unexpectedly benefited from the ongoing Greek crisis and from the bond-buying programme driven by the European Central Bank.

That has helped Ireland sell more goods and services to Britain, exporters said.

The Government in its spring economic statement forecast that the euro would trade this year at 72p, down sharply from 81p last year.

Unlike Ireland, Portugal, Spain and Cyprus, which all received international bailouts, Greece has not been able to regain access to international debt markets to borrow money and refinance its debts at affordable rates.

The nominal value of Greek 10-year bonds were trading yesterday at around 11.40%, close to levels at which Irish bonds were changing hands as Ireland entered bailout talks with the troika in November 2010.

But analysts say that the market for Ireland’s bonds has, as yet, not been roiled by the Greek debt talks.

Irish 10-year bonds are trading at 1.32%, significantly lower than those of Portugal at almost 2.60%. Irish bonds were nonetheless trading at over double the yield for Germany of 0.61%, and remain higher than Belgian yields of 0.91%.

Seamus Coffey, senior lecturer at University College Cork, said there is no precedence for a relatively wealthy country defaulting on its loans to the IMF and therefore no one is sure what would happen if Greece fails to meet its repayment demand next week.

“There will be consequences, but the big hit would come only if Greece left the eurozone. There may be a get-out-of jail clause with the IMF. But if it turned out that Greece started to default on the EU creditors then the consequences would become more serious,” Mr Coffey said.

Alan McQuaid, chief economist at Merrion Capital, said he believed that bond markets won’t be “complacent” if it became a question that Greece was leaving the euro. “Yields could rise quite substantially then, though Ireland’s yields may not go up as high as others,” he added.

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