Analysts at KBC Bank say the turmoil in Ireland is likely to linger (Via KBC Bank):
The Irish crisis will continue for some time as the Irish still refuse an EFSF rescue package that would keep them out of the bond market for a few years. It seems the government cannot admit the inevitable yet. Pride and political calculations may be behind the refusal of the Irish government to accept European help. The Irish “asked” for support dealing with the Irish banking problems and a mission consisting of IMF-, EU Commission- and ECBrepresentatives will be in Dublin to assist the government in coping with the banking sector. This should very likely lead to a sort of bailout in the next days to weeks. It might give the Irish government the time to explain their citizens that it is in fact a bailout of the banking sector, not of the government, which for the outside world makes little difference. Indeed, it is inconceivable that the Irish government/country would ultimately not be the guarantor/debtor of the loans the EU/IMF will grant, be it for the banking sector. If the market agrees with this interpretation, the damage of not accepting the bailout right now might be more limited short term, but as time, days more likely than weeks, would pass and the market would doubt that such a delayed “bailout” will take place, outright speculation against Ireland (and Portugal) will resume. While Ireland has taken courageous budgetary measures to address the crisis, it is an illusion to think that the 2011 budget and the 2011-2014 financing projections that will be unveiled soon will convince the markets that Ireland may overcome its huge problems without external help. The unsustainable situation in the banking sector and the risks that budgetary austerity will weigh ever more on growth, making it increasingly difficult to reach the budgetary targets and thus obliging the government to take more measures, mean that it is now beyond the means of the government to turn the market speculation.
The Irish FM also said that the problem was not specific Irish, but structural and euro wide and showed concern for the stability of the euro, which aside of the references to the banking crisis suggest that the Irish government is looking to package the inevitable bailout to be able to sell it in the political most appropriate way to its citizens. This kind of talk (including not asking for a bailout) sounds so familiar, as it was very much how the Greek acted ahead of their bailout earlier this year. According to news agencies, Euro zone Ministers had an agreement in principle to trigger aid for Ireland when the joint mission completes its consultations and the aid would not just be just a programme for the banks. French FM Lagarde said the mission would be closer to a question of days rather than 6 months.