Apart from understandable nervousness about pronounced near term political uncertainty, Irish economic prospects are seen hinging on (i) how credibly the budget gap can be closed, (ii) how the banking sector can be returned to working order, (iii) what terms and conditions are likely to apply to external support to Ireland from the EU and the IMF and (iv) whether the Irish economy can grow in the face of the constraints posed by the first three influences. Today’s four year program leaves us clearer in only one respect, albeit an important one.
On balance, the details provided today in terms of precise measures to be enacted appear reasonably credible in terms of mapping out how order can be restored to Ireland’s public finances. However, major questions persist about Ireland’s banking sector, the precise nature of the EU/IMF support program and even about the future of EMU. So, any positive market reaction to today’s news is likely to be limited.

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