RATINGS AGENCY MOODY’S has said it expects Ireland to need a partial second bailout next year.
The agency this morning said Ireland was likely to “face challenges regaining market access in 2013″ – and warned that the referendum on the Fiscal Compact could leave Ireland “isolated” if it votes No.
Because of the difficulty in regaining full market access, it said, Ireland was likely to need at least some access to the European Stability Mechanism – the permanent bailout fund which will only be accessible to countries who ratify the fiscal compact.
Ireland is “likely need to rely on the ESM, at least partially, when the current support programme expires,” Moody’s said, adding:
If voters reject the referendum, it could also leave Ireland isolated, particularly if it ends up being the only euro area country to reject the pact.
The government has consistently said that it hopes to return to the open money markets in the second half of 2013, and that it hopes to hold experimental bond auctions later this year to gauge public interest in Irish debt.
Moody’s adds that the referendum could act as a lightning rod for public anger about the economic outlook.
“This vote [... could be] a litmus test regarding public support for austerity, and the conditionality of financial support from other euro area members, at a time when unpopular austerity measures have already created a fractious mood among the general population in distressed EU countries,” the note says.
The agency has so far been more pessimistic about Ireland’s outlook than either Standard & Poor’s or Fitch, and is the only one of the three to rank Irish government bonds in ‘junk’ territory.
Moody’s ‘weekly credit outlook’ bulletin also notes that Irish Life & Permanent has tripled the amount it sets aside to deal with impaired loans, which it says is a “credit negative” event.