REFILE-WRAPUP 1-Cowen’s tactics delay IMF vote on Ireland

(Refiles to correct last name of analyst in paragraph six)

* IMF will wait until Ireland’s parliament votes on bailout

* Parliamentary approval is a political manoeuvre

* Fin min says Ireland will start accessing funds next year

* Fitch says will take several years for ‘A’ rating

By Carmel Crimmins and Yara Bayoumy

DUBLIN, Dec 10 (BestGrowthStock) – The International Monetary Fund
postponed approving a multi-billion euro loan for Ireland on
Friday after Prime Minister Brian Cowen said he would seek
parliamentary approval for the bailout.

Cowen is expected to get the 85 billion euros joint IMF/EU
rescue package through the lower chamber next week but his
politically charged decision to put it to a vote creates
uncertainty and delays that investors will not appreciate.

Highlighting the depth of Ireland’s crisis, data on Friday
showed the country’s banks’ growing dependence on funding from
the European Central Bank and its own central bank with
estimated borrowings of some 140 billion euros, representing 30
million euros for every person living in the country.

The bailout is meant to wean Irish banks off such assistance
halting an outflow of corporate deposits and allowing them to
return to term funding markets again.

But analysts said banks’ addiction to such funding would
continue until they laid out plans to shrink their assets, a
requirement of the emergency aid, and started selling off loans
next year.


Euro zone graphic package

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“Given all the noise that was taking place I think until the
restructuring plans become clearer and implementation commences
… I think realistically it’s not going to happen until then,”
said Jim Ryan of Dublin-based Glas Securities.

“The best one can hope for in 2010 is to stop deposit
outflows and then in 2011, when matters become clearer, we
should start to see some inflows again.”

The IMF’s board will consider its 22.5 billion euros portion
of the bailout on Thursday assuming Ireland’s parliament passes
the package in a vote on Wednesday.

Finance Minister Brian Lenihan told parliament he expected
Ireland to start accessing external funding early next year.

The premium investors demand to hold Irish debt
(IE10YT=TWEB: ) over benchmark German paper (DE10YT=TWEB: ) rose 9
basis points to around 540 bps on Friday amid a slowdown in ECB
bond buying.


Emboldened by the ease at which a record austerity budget is
passing through parliament, Cowen is clearly confident the
bailout will get the thumbs up from the chamber despite his
razor-thin majority and plunging popularity.

Lawmakers passed legislation by 79 votes to 74 on Friday to
lower the minimum wage and cut ministers’ salaries and public
sector pensions, the latest stage in passing the 2011 budget,
which is a crucial plank of the IMF/EU deal. [ID:nLDE6B91FT]

The cutbacks and tax hikes mark the start a four-year cycle
of austerity that will squeeze 15 billion euros out of an
economy still smarting from a prolonged and painful recession.

Cowen’s decision to put the IMF/EU bailout to a
parliamentary vote, after previously saying he was not obliged
to, is designed to put the main opposition parties under
pressure ahead of a national election, likely in January or

The centre-right Fine Gael party and the centre-left Labour
party have harshly criticised Cowen for seeking external funds,
slamming the deal as a humiliating loss of sovereignty.

But both parties will have to work within the targets set
down in the deal when they form a new government, as expected,
in the first quarter of next year.

Lenihan told parliament that if the next government departed
from the four-year plan it would do so “at its peril”.

“There’s no point in deluding ourselves about what must be
done to ensure Ireland emerges from this crisis,” he said. “We
have to accept there are no easy options.”
Ireland has been transformed from one of Europe’s brightest
economic stars to a regional sore point on the back of years of
reckless bank lending which fuelled a property bubble and
brought the former “Celtic Tiger” economy to its knees.

Fitch ratings agency, which stripped Ireland of its ‘A’
credit status this week told Reuters Insider on Friday it would
take the country several years to be back in the ‘A’ grade.

“Fiscal consolidation will last at least three, if not four
or five years and it will take them a long time to get back with
workable public finances,” Chris Pryce, Fitch’s primary analyst
for Ireland, said. [ID:nLDE6B915J]

“Irish people will have to tighten their belts more than
they have tightened them,” he said.

REFILE-WRAPUP 1-Cowen’s tactics delay IMF vote on Ireland