WRAPUP 2-ECB’s Noyer assures cagey markets over Ireland rescue

* ECB’s Noyer-confident Ireland rescue will lower yields

* Noyer says expects no need for “haircuts” in future

* EU agrees outlines of permanent crisis mechanism

* Private bondholders may take debt writedowns after 2013

By Jan Strupczewski and Stanley White

BRUSSELS/TOKYO, Nov 29 (BestGrowthStock) – European Central Bank
policymaker Christian Noyer sought to bolster market
confidence in the euro zone’s rescue for Ireland, telling
cagey investors they should have faith in the plan’s success.

Euro zone ministers — acting under pressure to prevent
the crisis of confidence in the region’s finances from
engulfing Portugal and Spain — also backed a long-term
mechanism intended to prevent the debt crisis from tearing the
zone apart.

Noyer, the first member of the ECB’s policy council to
speak after euro zone ministers sealed an 85 billion euro
($115 billion) loan package for Ireland on Sunday, said he was
confident the deal would bring down Dublin’s borrowing costs
to more normal levels.

“There is no reason to doubt the recovery plans of the two
countries,” Noyer said in a speech in Tokyo, referring to
Ireland and Greece.

But market reaction showed investors thought the crisis
that started with Greece’s budget blow-out more than a year
ago was far from over.

The euro rose slightly against the dollar in early
Asian trading on Monday, but quickly slipped back to two month
lows. [ID:nSGE6AR02]

“I don’t think this is going to be a silver bullet. I
think there are still going to be some question marks on
Portugal and Spain,” said Peter Westaway, chief economist at
brokers Nomura.

One of the questions that has been dogging markets for
weeks and helped drive Ireland off the cliff was whether and
under what circumstances private bondholders could be made to
take losses, or “haircuts”, on euro zone government debt.

The new European Stability Mechanism outlined on Sunday
would make private investors share the pain in the case of a
debt default or restructuring, but it would apply only to debt
issued after 2013.

Noyer, who is also governor of the Bank of France, said
that he believed even then it should remain only a theoretical

“As far as I’m concerned, I exclude that there will be
haircuts in the future. It will be a major objective of all
members of EU to do everything necessary to be in a position
to fully honour their debts in the future.

European officials have been at pains to play down the
between Ireland and Portugal, widely seen as the next euro zone
“domino” at risk. Troubles in Portugal could quickly spill
over to Spain because of their close economic ties.

Noyer joined the chorus on Monday, saying Portugal was
making good progress in consolidating its public finances.

With anxiety rattling bond markets, the Irish government
been under intense pressure to accept a bailout despite
repeatedly saying in recent weeks it did not need one.

“This agreement is necessary for our country and our
The final agreed programme represents the best available deal
for Ireland,” Irish Prime Minister Brian Cowen said.

The deal aims to help Dublin cover bank debts amassed when
a property bubble burst and bridge its budget deficit, which
ballooned to about a third of the country’s annual economic

Debt worries have marred Europe’s recovery from global
recession for the past year, severely denting confidence in
the 12-year-old euro currency and leading to what amounts to a
showdown between European politicians and financial markets.


Some 35 billion euros was earmarked to help fix Irish
banks, of which 10 billion will be an immediate capital
injection and the rest a contingency fund. Ireland will
contribute 17.5 billion euros in cash and pension reserves.

The rest of the emergency loans, which Dublin said were
granted at an average interest rate of 5.8 percent, will help
cover the giant hole the banks have blown in public finances.
The IMF will contribute 22.5 billion euros. [ID:nWLA9299]

In a key concession, Ireland was given an extra year, until
2015, to bring its budget deficit down to the EU limit of 3
percent of gross domestic product.

And Cowen, whose government is close to collapse over the
EU/IMF bailout, said the deal did not involve any change to
Ireland’s jealously guarded 12.5 percent corporate tax rate.
($1=.7540 Euro)
(Additional reporting by Luke Baker, Timothy Heritage and
Bate Felix in Brussels, Carmel Crimmins, Lorraine Turner and
Padraic Halpin in Dublin, Sakari Suoninen in Frankfurt and
Lesley Wroughton in Washington; writing by Tomasz Janowski;
editing by Neil Fullick)

WRAPUP 2-ECB’s Noyer assures cagey markets over Ireland rescue