Ireland opts to exit bailout without back up credit line
Ireland said on Thursday it would make a clean break from its EU/IMF bailout next month, forgoing a precautionary credit line that some of its European partners had wanted it to take.
Its prime minister, Enda Kenny, said it was the right decision at the right time for his country.
Three years after being unable to raise a cent on bond markets, Ireland has funded itself into 2015 with timely debt issuance over the last 18 months, helping create a much-needed success story to the rest of the euro zone.
"This is the latest in a series of steps to return Ireland to normal economic, budgetary and funding conditions... We still have a long way to travel but clearly we are moving the right direction," Kenny told parliament after an unscheduled cabinet meeting where Finance Minister Michael Noonan briefed his colleagues on the exit strategy.
Ireland's "troika" of international lenders - the European Commission, European Central Bank and International Monetary Fund - signed off on the last part of the 85 billion euro ($114 billion) aid program last week, paving the way for Ireland to complete it by the end of the year.
(Read more: Ireland's latest austerity cut: Its government)
The country is the first in the euro zone to emerge from bailouts that were required for a variety of reasons following the global financial crisis.
Greece, Portugal and Cyprus have also had sovereign bailouts, while Spain has had help for its banking system.
The only issue remaining for Ireland was whether the government would take out the insurance policy of asking for a credit line when the bailout ends. It has decided no.
ECB President Mario Draghi said last week that a precautionary line would be useful while EU Economic and Monetary Affairs Commissioner Olli Rehn said it may not be necessary.
No back up
The chief sovereign ratings officer of Standard & Poor's said on Wednesday that Ireland could refuse a funding backstop from its bailout lenders without damaging its credit rating.
Ireland's main opposition party Fianna Fail, which was in power when Ireland signed up to the bailout in November 2010, warned Kenny that the move was a risky one with potential problems ahead for Ireland's banks and the euro zone.
Ireland's finance ministry said that Europe's new stability treaty, the firepower of its bailout fund and the major efforts by the ECB to do whatever it takes to safeguard the currency would further support a durable return to the markets.
However forgoing a credit line means Ireland will be unable to access the ECB's government bond purchases scheme, the so far unused Outright Monetary Transactions (OMT).
"Not taking a credit line is a statement of confidence by the government. It bolsters the sense that Ireland is detaching itself from the peripheral countries," said Ryan McGrath, a Dublin-based bond dealer with Cantor Fitzgerald.
"I don't think the government is being rash. The big question is what are the implications for OMT access."
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