Ireland says it is likely to accept bailout

Patrick Honohan, the governor of the Irish central bank, has said Ireland is likely to accept a bailout worth tens of billions of euros during a visit from the EU and the IMF, according to Bloomberg.

Ireland is likely to pay a similar 5% interest rate to that proposed for Greece following its bailout in the spring, according to Honohan, who made the remarks in an interview with Irish broadcaster RTE.

Speculation is growing Portugal may also seek an early bailout. The yield on its ten-year bonds is now much higher than the EU/IMF rate, at 6.81%.

Spain’s ten-year bond yield is now at 4.67%. The Spanish government has proposed draconian measures to reduce its deficit and avoid a bailout, which would cost hundreds of billions of euros. (article continues below)

But revenue from the private sector remains weak and unemployment is still high. Spanish banks, which are a natural source of demand for government debt, are also running out of funding and have had to seek support from the European Central Bank.

Italian ten-year yields are lower at 4.19%. The country has been trying to run budget surpluses and avoid fiscal stimulus to reduce its enormous public debt burden.

Its private sector is also less indebted than Spain’s or Ireland’s.