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Ireland faces double dip, mulls restructuring of junior bank debt
Date 24/09/2010 14:30  Author webmaster  Hits 1050  Language Global

24 SEP 2010

Irish borrowing costs have surged to a post-EMU record after Ireland's recovery buckled over the summer and Dublin said creditors of Anglo Irish Bank may be asked to "share" losses, a warning to bondholders that the dam may at last be breaking on debt restructuring in the eurozone.

By Ambrose Evans-Pritchard

The Irish economy contracted at a 1.2pc rate in the second quarter, making Ireland the first country since the Great Recession to face a double-dip downturn.

The setback is a blow for hopes that Ireland can slowly grow its way out of debt, and may renew concerns that fiscal austerity without other forms of relief risks tipping the economy into a self-reinforcing spiral.

Ireland has been praised for grasping the nettle early in its debt crisis with public sector wage cuts of 13pc, leading the way for other eurozone debtors in trouble. But the reward for good behaviour has yet to come.

Otmar Issing, a founder of the European Central Bank, told a Berlin forum that the risk of a populist backlash against austerity is growing.

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