Market Sentiment Lifted in the Near-term as Irish Bailout Deal Finalized
Ireland and EU/IMF reached a bailout agreement over the weekend. The financial package will cover financing needs up to 85B euro but unusually 17.5B euro of it will come from Irish government cash reserve and from the national pension fund. Several terms are favorable for Ireland. For instance, senior bondholders of Irish banks are not subject to haircuts, there is no condition that Ireland must raise its 12.5% corporation tax and Ireland has been given one extra year, to 2015, in order to reduce its budget deficit to below 3% of GDP. Meanwhile, the Eurogroup also agreed on ways to deal with post 2013 bailouts and collective action clauses would be part of all new euro area government bonds starting in June 2013.
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