DUBLIN — Ireland's financial troubles loomed large Wednesday as investors — betting that the country soon could join Greece in seeking an EU bailout — drove the interest rate on the country's 10-year borrowing to a new high.
The yield on 10-year bonds rose above 8 percent for the first time since the launch of the euro, the European Union's common currency, 11 years ago.
The cost of funding Irish debt has risen steadily since September, when the government admitted its bailout efforts of five banks would cost at least €45 billion, equivalent to €10,000 for every man, woman and child in Ireland. That gargantuan bill, in turn, has made the projected 2010 deficit rise to 32 percent of GDP, the highest in post-war Europe.
The yield, or interest rate, on 10-year Irish notes rose steadily from 7.94 percent to reach 8.18 percent by midmorning. As the value of bonds fall, buyers demand ever-higher yields as compensation.
Bond traders increasingly believe that Ireland soon will be forced to tap Europe's emergency fund for euro-zone nations facing a threat of bankruptcy. The 16 nations of the euro zone created that €750 billion backstop in May as the EU and International Monetary Fund provided an emergency €110 billion loan to Greece.
Another bailout would send more shock waves through the currency union, which has struggled to find ways to keep individual governments from overspending and threatening the currency's value.
Prime Minister Brian Cowen insists Ireland has enough cash on hand to fund the government budget through June 2011. But he needs the interest rates being demanded by investors to fall substantially before Ireland needs to borrow again in early 2011.
Unless Irish yields decline to pre-crisis levels, Ireland would have to pay punitive rates of interest to woo new buyers of Irish bonds, further handicapping its ability to rein in government costs. But economists say tapping the European fund — whose rules have yet to be fully agreed among members — could be nearly as expensive, with rates likely to exceed 6 percent.
- Taiwan plane crash survivor crawls out of...
- What happened on the ground the day Flight 17...
- After government topples crosses in China,...
- Feds cap fines for not buying health...
- Federal land managers criticized over...
- Associated Press analysis: Colorado gun law...
- A kiss, a prayer: The last hours of MH17's...
- Cellphone unlocking set to become legal again
- Propaganda war continues in Hobby Lobby... 52
- Appeals courts issue contradictory... 49
- Herbert among 6 governors raising... 46
- Gov. Rick Perry sending National Guard... 25
- Hamas calls for end to blockade of Gaza... 25
- Obama fundraises for Dems; demands GOP... 20
- Feds cap fines for not buying health... 18
- Despite crush of children, illegal... 16