DUBLIN (AP) – 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 – above 8 percent for the first time since the launch of the euro 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 euro, equivalent to 10,000 euros 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.
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. 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.