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Barclays Capital sparks fears of Irish collapse

A report by Barclays Capital have created further turmoil in the money markets with a suggestion that the Irish economy is on the verge of collapse and the government may well need an injection of billions of pounds from the international community. There are also reports that the European Central Bank has been forced to buy Irish government bonds amid concerns that the budget deficit is running out of control.

Sources within the Irish government suggest that no international bailout is required as yet and talk of international assistance may well be short of the mark. However, there's no doubt that the government is struggling to put the financial sector back on a firm footing, something which has not gone unnoticed by the money markets. Only a few days ago we saw the premium required to insure Irish sovereign debt increase dramatically amid growing concern amongst investors.

Despite the fact that many people believe that the worst of the economic downturn is over, the truth is that very choppy waters lay ahead in the short to medium term around Europe and indeed around the world. If investor confidence in Ireland dips even further this could cause a self-fulfilling prophecy which could force the government to go cap in hand to the international community.

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