IRELAND has been the greatest and most consistent source of good news in the eurozone over the past year, a leading economist and former member of the European Central Bank executive board has said.
Lorenzo Bini Smaghi said Ireland is the only country whose current account moved back to surplus since 2010, with competitiveness boosted by structural reforms and falling wage costs. In his ‘Financial Times’ blog, he said that while the budget deficit was high, it fell 6 percentage points last year which, he said, was faster than expected and is due to fall further over the next two years.
“There may still be some way to go for Ireland to be considered as having fully recovered market access, but the direction is right and the remaining gap may be smaller than many think,” he wrote in his blog.
Mr Smaghi said Ireland should be able to benefit from the ECB’s new bond-buying programme, dubbed outright monetary transactions (OMT).
He said European authorities could now follow two types of strategies – stand back and do nothing to help Ireland in the hope that it can return to the markets fully by itself, or allow it access to the OMT.
“The quicker the country graduates, and becomes eligible for the bazooka (OMT), the less likely the bazooka will have to be used and the greater the positive contagion to the rest of the system,” the former senior ECB official wrote.
By Colm Kelpie