Economist says credit line would be ‘preferable’

The Government’s decision to exit the bailout programme without a credit line

has been was met with caution by some financial analysts.

According to Juliet Tennant, economist at Goodbody capital markets, opting for a safety net would have been preferable.

“The Government is indeed in a comfortable funding position [BUT]we would have preferred to see the Government apply for a precautionary credit line; not only for the safety net it would have provided but also the additional external surveillance that would have ensured that momentum in the implementation of the outstanding bailout programme reforms would be maintained,” she said.

“However, Ireland’s decision to exit alone shows confidence in its ability to fund itself and may well be viewed favourably by the ratings agencies, particularly Moody’s.”

There was little market reaction immediately following the announcement, with Irish 10-year bonds trading at 3.533 having opened slightly higher at 3.556.

Taoiseach Enda Kenny informed the Dáil of the decision this morning, ahead of a meeting of European finance ministers this afternoon at which Michael Noonan will give a briefing on the decision surrounding the December 15th exit.

The Government, in support of the move, also pointed to historically low levels of bond yields and an improvement in public finances with the country now on track to meet the deficit reduction of less than 3 per cent by 2015.

Euro area safeguards are also in place, including the ESM and the support of the European Central Bank, it said.