Minister Leo VaradkarGoogle Images

The Irish government has had to backtrack furiously after Transport Minister Leo Veradkar predicted the need for a second EU/IMF bail-out next year.

Veradkar sparked panic on Sunday when he claimed that the Fine Gael-Labor coalition government may have to ask the European Union and the International Monetary Fund for new loans next year.

The Dublin deputy had claimed that Ireland would not be able to go back to the international bond markets until 2013, a year behind schedule.

“I think it’s very unlikely we’ll be able to go back to borrowing on the bond markets next year. I think it might take a bit longer... 2013 might be possible but who knows?” said Veradkar.

“It would mean a second programme of loans from the EU/IMF. Either an extension of the existing programme or a second programme. I think that would generally be most people’s view.”

The Irish government is now worried how markets will react to the comments by Veradkar but the young Minister will escape censure for revealing delicate information from the cabinet table.

Finance Minister Michael Noonan and his department have reacted to the comments by insisting Ireland’s financial recovery is on track under the terms of the original EU/IMF bailout.

 

The Department of Finance has again stated that the country will return to borrowing on the bond markets in 2012 and stressed there was no change in the Government’s plans.

They also discounted the notion that another bail-out – with more spending cuts and increases in taxation – was on the cards.

Independent economists however agree with Veradkar’s comments with some experts even telling the Irish media on Monday that a return to the bond markets is unlikely before 2014.

The Minister has since backtracked on his initial statement, made during a media briefing on transport plans.

“My quote was in response to a hypothetical scenario,” Veradkar told the Irish Independent.

“I am basing my spending plans, prudently I believe, on the more pessimistic scenario. Nobody really knows and there are no crystal balls.”

A Department of Finance spokesman insisted: “The policy is to return to the bond markets next year.

“The situation would have to be reviewed closer to the time, and advice sought from the National Treasury Management Agency.

Just last week, Irish Prime Minister Enda Kenny was adamant that his government will meet its obligations under the current bail-out.

“We will repay our loans. We will not restructure our debt. We’re not looking for any further time, we are going to meet this challenge,” said Kenny.