Ireland hasn’t had anything to cheer about since the onset of the global financial crisis in 2008 but in the past week, that has slightly changed. Becoming the first eurozone country to enter recession, it was downhill since that declaration by the Central Statistics Office in September 2008. Almost four years on and with the horror of a bail-out behind them, the Emerald Isle is edging a step closer to fiscal normality. With Ireland returning to public debt markets for the first time since September 2010, the international financial markets showed faith in Ireland’s future economic prospects by quickly snapping up three month treasury bills (T-Bills). With a government debt sale of €500m going better than expected, there is, at long last, a glimmer of hope for a real Irish recovery. Although the harsh austerity is there to stay for several more years yet, there is finally some positivity amongst all the doom and gloom emanating from the land of 1,000 welcomes.
On July 5th at 9:30 a.m., local Irish time, an auction to sell the T-Bills commenced and an hour later it was all over, with the €500m raised without a problem. However some people were very skeptical of this auction as other eurozone countries experiencing financial problems, Greece, Spain, Italy and Portugal have already done this. There is a major difference in the case of Ireland, though, and that of their companions of the same currency. Ireland’s expected yield was 2%. They performed even better than that by having a yield of 1.80% once the auction had finished. The yields for the other countries for the same three month period were 4.34% (Greece), 2.37% (Spain), 5.30% (Italy) and 4.35% (Portugal).
Nevertheless, in the present situation, all good news must be treated with caution and despite the respite for Ireland, the struggle of the entire eurozone could stall them from much more progress. However it is very difficult to find any pessimistic view of this development as the country touted as the ”poster child” of austerity in Europe finally looks to be heading on an upward curve. The nation will certainly have more tough times ahead as the relentless European wide pursuit of austerity is certain to stay. But possibly the single greatest reason in this confidence from the bondholders at the auction could be the revelation at the most recent eurozone summit on the strong chance of sovereign and bank debts being kept separate. And if common sense like that keeps on prevailing at those summits, this crisis should be over sooner rather than later.