Germany open to bail-out of a eurozone country
18.02.2009 @ 09:23 CET
Germany has, for the first time, publicly raised the idea of bailing out nations in the eurozone that are struggling in the face of the economic crisis, mentioning Ireland in particular.
"We have a number of countries in the eurozone that are clearly getting into trouble on their payments," said German finance minister Peer Steinbrück, according to Reuters.
"Ireland is in a very difficult situation," he noted.
"The euro-region treaties do not foresee any help for insolvent states, but in reality the others would have to rescue those running into difficulty."
The comments, made at a Social Democrat conference on Monday, appear to represent a shift in Berlin's thinking, with Germany previously indicating that countries with ailing economies would have to solve their problems themselves.
Ireland, once famed for it booming economy and nicknamed the Celtic Tiger, has been particularly hit by the financial crisis which has seen its property market implode.
Its top credit rating is at risk, rating agency Moody has warned and it suffers from a yawning budget deficit — this year predicted to rise to 11 percent of GDP, smashing through the rules of the eurozone, which limit budget deficits to three percent of growth domestic product.
Credit default swaps (CDS) on Irish Government bonds rose to 386 on Tuesday, prompting the Ireland's Department of Finance to release a statement that conclusions about the "soundness of Ireland's public finances" should not be drawn on the basis of credit default swaps.
A rise in the rates is a sign that market is nervous about credit quality. Greece, Spain, and Austria have also seen strong hikes in default costs...