EURO DEBT CRISIS COULD DRAG US DOWN WITH IT; Investors could undo Ireland's good work.
THE deepening European debt crisis and sputtering US growth could drag Ireland into crisis, Finance Minister Michael Noonan warned yesterday.
He said that Ireland's reversal of fortune could be undone as investors, unimpressed by the European Central Bank stepping in to buy Italian and Spanish bonds, sent world stocks tumbling to 11-month lows.
Mr Noonan added he and the Taoiseach were monitoring the situation "very closely", despite refusing to return from holidays to deal with the crisis.
He said: "I have been in touch with the Taoiseach.
"I am constantly on to the Department and from the Department on to the Central Bank.
"There is nothing directly we can do at the moment.
"From our point of view, we are reasonably well-positioned since the renegotiation downward of the interest rate and the other functions given to the ESFS and the fact that US and Canadian money has bought a big tranche of Bank of Ireland.
"These are all very hopeful signs for Ireland but we are always a small player in these events but we can be dragged back into difficulty by external forces."
Ireland is relying on Gross Domestic Product growth next year of 2.5% to get its Budget deficit down to 8.6% of GDP from an estimated 10% this year.
Mr Noonan signalled a gloomier outlook for the US could mean even tougher measures in 2012 on top of the EUR3.6billion in planned cutbacks.
He said: "It is too soon to say what the consequences of what is happening in America will be because there are some positive signs in the American economy as well and a lot of commentators will disagree that there is a double-dip recession in prospect.
"On the budgetary side, there are a number of variables.
"The target we have to meet is not a correction of EUR3.6billion but a deficit target of 8.6% of GDP.
"Whether we can get there on EUR3.6[billion] or slightly more is not clear yet."
Fears that the US may be sliding back into recession, worries about a downgrade of America's prized AAA rating and Europe's debt woes combined to pummel financial markets These last week in one of the worst routs since the dark days following the collapse of Lehman Brothers in 2008.
Mr Noonan said the ECB's purchase of Italian and Spanish bonds had helped keep those countries out of "bailout territory".
He added: "The markets across Europe are responding both to the European crisis and to the crisis in the United States. There is obviously a fear of the United States going into recession again and that's what are is driving down equity prices."
The cost of borrowing for the Irish Government has also passed a welcome threshold - the cost of a 10-year loan yesterday fell below 10% for the first time since April 20.
Just three weeks ago, a similar loan on the open market would have cost Ireland 14.22%.
EUR3.6bn The cuts the Government is planning next year to get its Budget deficit down to 8.6% of GDP
WORRIES Debts could impact us says Michael Noonan