An Irish government minister said on Sunday that his government may require a new bailout package or an extension of the existing EU-IMF package since it may not be able to return to debt market next week.
Leo Varadkar – the Irish Transport Minister, is the first member of the government to cast doubt over the government’s ability to return to the debt market.
“I think it’s very unlikely we’ll be able to go back next year. I think it might take a bit longer … 2013 might be possible but who knows?” he was quoted as saying by The Sunday Times.
“It would mean a second programme. Either an extension of the existing programme or a second programme, I think that would generally be most people’s view”, he said.
The Irish government had planned to tap the investors by 2012 before the IMF-EU €85 billion loan tenure ends the following year.
However investors believe Ireland will be unable to return to the debt market in 2013 and may be forced to access the EU permanent rescue fund instead. This uncertainty is being reflected in the medium term two year and five year Irish bond yields, which is currently hovering around 12 percent, more than the country’s ten year papers.
More than €50 billion of the EU-IMF fund has been set-aside for the country’s sovereign debt requirements, while the remaining portion will be used for recapitalising up the country’s struggling banking sector.
IMF had said in a statement earlier this month that Ireland can utilize the excess fund after recapitalizing its bank for sovereign funding purposes.
It is believed that Dublin will require an estimated €19 billion for recapitalizing its banks from the €35 billion earmarked for propping up the banks, meaning the remaining amount can be used for sovereign purposes.