The downgrading of Irish public debt by Standard and Poors has dealt a body blow to the international credibility of the Government’s banking strategy. Of greater significance has been the steady increase over recent weeks in the cost of borrowing for Ireland and yesterday the so called bond spread that measures the additional price Ireland has to pay over Germany rose to a record level. In early trading today, this spread reached no less than 335 points, representing a 3.35% interest premium we have to pay for long term borrowing.

“Every taxpayer in Ireland, individual and business, will have to pay over and over again for this folly.

“These developments must cause serious disquiet in the Cabinet. They entirely undermine everything both the Taoiseach and the Minister for Finance have said in relation to the cost of the bank bailouts, notably the ever rising cost to the taxpayer of Anglo Irish and Irish Nationwide.
“They also undermine the entire economic strategy of the Government. All the austerity measures that the people of Ireland have had to endure in the past two years were aimed at establishing sufficient international credibility for Ireland to secure lower borrowing costs so as to reduce the exchequer deficit and the huge cost of servicing the debt. We are now right back to where we started with no discernible gain from all the pain inflicted.

“We are now in the final month of the ill fated bank guarantee of September 2008 and we still do not have a clear indication from the Minister of an exit strategy. The Minister foolishly called this guarantee “the cheapest bailout in the world, so far” in September 2008, but it is not looking that way now. Arguably, it is the exact opposite. The one thing that is corroding international confidence is the refusal of the Minister to give a complete and honest indication of the true cost of his banking policies. Each statement he has made has been undermined by events and each new estimate has become redundant within weeks as further billions are added to the accumulated losses.
“While Labour would prefer a full recall of the Dail at an earlier date to the one imposed by the Taoiseach, we believe that an early meeting of the Finance Committee is absolutely essential to hear a full statement from the Minister on these disturbing increases in Irish bond spreads and their implication for future budgetary policies. I am writing today to the Chairman requesting such a meeting next week.

“Confidence is a key component of a recovery strategy and it is very evident today that there is very little confidence either nationally or internationally in the current Government’s capacity to get to grips with the true costs of the Irish banking collapse.”