Nobody wants Irish sovereign debt

The worldwide sovereign debt market is struggling to digest the problems within the Irish economy and today we saw the cost of insuring Irish sovereign debt increase to 300 basis points. There is now major concern regarding the recapitalisation of the Irish banking sector which has suffered more than most during the credit crunch and the worldwide recession. The Irish Central Bank this week suggested that a total of €25 billion could be required to stabilise the Anglo Irish Bank Corp. which was taken under government control when it nearly collapsed.

Many people have for sometime believed the Ireland will be the next economy to be bailed out by the European Union and today's movements in the money markets would appear to back up this claim. The more expensive debt comes for the Irish government the more money will be used to finance existing debt leaving less funding available to bailout the economy. While the authorities are in public still very confident they will not need to go cap in hand to the European Union or the IMF the opinion of those in the money markets is very different.

The higher the cost of lending for the Irish authorities, the greater the possibility of requiring external finance to steady the ship.