'No' vote would add €210m to cost of national debt

[mgt23]

zio threat.....

http://www.independent.ie/national-news ... 92641.html

THE cost of funding the national debt could shoot up by more than €200m next year, if Irish voters reject the Lisbon Treaty in next month's referendum, leading economists warned last night.

Bloxham managing partner Pramit Ghose said a 'No' vote was likely to widen the gap between interest rates charged on Irish government bonds and those paid on similar German bonds.

Dan O'Brien, senior economist at the Economist Intelligence Unit, said that he had "absolutely no doubt" a 'No' vote would result in a sell-off of government debt."I would bet the house on that," he told the Irish Independent.

And Mr O'Brien said that the explosion in government debt in recent months meant the country was now "way out there past Greece, with its head above the parapet".

He said that a 'No' vote would mean Ireland "making itself a target" for a massive sell-off in government bonds, as it would put a doubt in the mind of some of the market players over whether Ireland would continue to be part of the European Union. Other economists agreed. KBC Bank's Austin Hughes said a rejection of the treaty was likely to be seen as a negative in the bond markets.

"There is no doubt that there could be an impact, though it is impossible to put an exact figure on it.

Mr Hughes added that the long-term cost would ultimately depend on how the other EU members decided to proceed in the event of a 'no' vote by the Irish public, with a two-speed Europe a distinct possibility. While Mr Hughes was reluctant to put a precise figure on the cost of a rejection, Mr Ghose estimated it at over €200m in the coming year.

The additional cost would arise because the gap, or spread, between Irish and German bonds would widen.

He estimated that a 1pc increase in funding costs next year would lead to €210m in extra costs on the national debt.

- Pat Boyle