Irish central bank chief says he doubted bailout success in 2010
DUBLIN (Reuters) - Central bank chief Patrick Honohan saw only a slim chance of rescuing Ireland's economy when he helped negotiate an international bailout in 2010, he said on Monday.
Ireland became the second euro zone country after Greece to take an EU/IMF bailout when it was locked out of lending markets in late 2010. But it was the first to complete its programme, just over a year ago, and can now borrow from debt markets at record low rates.
Honohan said at the time the programme was designed, International Monetary Fund staff and Irish negotiators -- including him -- saw a high risk of failure.
"The risk was high that, at the end of the three years of the programme, the indebtedness of the government would be too high for the government to have access to the market at any reasonable terms, and would give rise to the need for a second programme and a prolonged period of uncertainty," Honohan said in the text of a speech.
"Partly due to some good fortune as well as to the sustained adherence to an effective fiscal adjustment programme, Ireland has done much better than it might have -- and much better than I and others expected -- in turning around a situation, the gravity of which became increasingly evident during 2009 and 2010."
Addressing a conference on lessons from the bailout, Honohan criticised Ireland's "troika" of lenders for opposing proposals to impose losses on senior debt-holders.
He said the opposition to "bailing-in" such bondholders, particularly those holding debt from Irish banks that eventually had to be wound down, was a "significant flaw in the programme design".
"True, there would probably have been some adverse reputational effect for Ireland from a bail-in, but very limited if it had been part of the programme design as was envisaged by some Troika officials," he said, referring to the group of official lenders.
After a deep recession, Ireland's economy is estimated to have grown by almost 5 percent last year, faster than any other in the European Union. Its budget deficit is set to fall below 3 percent of gross domestic product (GDP) this year having swelled to a third of the size of the economy after the 2010 bank rescue.
(Reporting by Padraic Halpin)
