12/11/2010

Debt Crisis Worsens After 'Irrational' Response

Ireland's debt crisis has taken an unexpected nosedive in response to comments by EU leaders over the State's ability to pay back its debtors.

The cost of Irish 10-year Government bonds soared to a startling 9.26% last night, prompting Taoiseach Brian Cowen to call for calm amongst international traders.

Markets were rattled last night by comments from German Chancellor Angela Merkel after she implied that some of Ireland's national debt would not be covered if the State was given an EU bailout.

However, this morning Brian Cowen has labelled the reaction as "irrational", saying while describing Ms Merkel's comments as "not helpful".

"What has been said there has had, I think, an unforeseen consequence, perhaps. I'm not suggesting that anything was said for the purposes of causing further difficulty," he said.

Ireland's EU partners have rallied in support of Ireland's position issuing statement from France, Germany, Italy, Spain and Britain at the Group of 20 summit ongoing in Seoul.

"Whatever the debate within the euro area about the future permanent crisis resolution mechanism and the potential private sector involvement in that mechanism we are clear that this does not apply to any outstanding debt and any programme under current instruments," the statement said.

Ireland's bond price responded by falling by 0.405% early this morning, but still remains high.

Portugal, Spain and Italy are also in vulnerable situations, as their debt crises arre linked to any troubles in Ireland as investors shun risky euro zone trades.

(DW)

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