The euro sank to a two-month low yesterday in a nervous first reaction to a multibillion-dollar bailout for Ireland that European governments hoped would steady the under-pressure currency.
Finance ministers who sealed the 85 billion euro (US$113 billion) deal at emergency talks in Brussels on Sunday were anxious to reassure Asian markets and head off any moves on Portugal and Spain, which are considered the next most vulnerable economies, but even as international financial leaders stepped forward to endorse the agreement, currency dealers in Tokyo gave their own verdict.
After early gains, the euro slipped to US$1.3181 yesterday, its lowest level since late September, before rebounding above US$1.32 in a volatile session.
Under the deal, Ireland’s crippled banks will immediately receive 10 billion euros, but will be subject to a “fundamental downsizing,” the Irish government said.
They will be able to draw on a total of 35 billion euros out of 67.5 billion euros in external aid from the EU and the IMF, but the first 17.5 billion euros comes from an Irish “treasury cash buffer and investments of the National Pension Reserve Fund,” an EU statement said.
Irish Prime Minister Brian Cowen said he had got “the best deal available” for Ireland and its people, a day after mass street protests in Dublin against austerity cutbacks introduced to qualify for the bailout, but opposition leaders denounced the deal.
Tens of thousands of protesters had already marched in Dublin on Saturday to protest against the agreement, but business leaders welcomed the deal.
Central Bank of Ireland Governor Patrick Honohan said the international support “underpins a clear economic and financial policy path for Ireland.”
Danny McCoy, head of the Irish Business and Employers Confederation, said it provided “much-needed certainty.”
Bank of France Governor Christian Noyer endorsed the plan yesterday as he spoke to reporters at a financial forum in Tokyo.
“The package has been clearly designed by the IMF and the EU, and you can rely on the multi-decade experience of the IMF to put in place plans that are totally credible,” Noyer said. “There is absolutely no doubt this plan will work.”
IMF chief Dominique Strauss-Kahn said he had no doubt Ireland would keep up its end of the deal.
“Supported by substantial financing, this program can underpin market confidence and bring Ireland’s economy back on track,” Strauss-Kahn said.
Non-euro countries the UK, Denmark and Sweden will provide bilateral loans totaling about 5 billion euros.
As part of the deal, Ireland was given an extra year, until 2015, to bring its deficit of 32 percent of GDP back within the EU’s permitted 3 percent limit.
Ireland’s coalition government unveiled a four-year plan last week that signaled spending cuts of 10 billion euros and tax rises of 5 billion euros, triggering the mass protests at the weekend.
Cowen said he expected Ireland to pay an average interest rate of 5.8 percent a year on the loans, subject to market conditions.
“Without these loans, the necessary tax increases and spending cuts would be far more severe,” Cowen said.
Brussels said it would also consider re-scheduling repayments on Greece’s 110 billion euro loans, as part of broader moves to convince bond buyers to keep interest rates at manageable levels.
Greece was the first recipient of a major bailout earlier this year.
CONFRONTATION: The water cannon attack was the second this month on the Philippine supply boat ‘Unaizah May 4,’ after an incident on March 5 The China Coast Guard yesterday morning blocked a Philippine supply vessel and damaged it with water cannons near a reef off the Southeast Asian country, the Philippines said. The Philippine military released video of what it said was a nearly hour-long attack off the Second Thomas Shoal (Renai Shoal, 仁愛暗沙) in the contested South China Sea, where Chinese ships have unleashed water cannons and collided with Philippine vessels in similar standoffs in the past few months. The China Coast Guard and other vessels “once again harassed, blocked, deployed water cannons, and executed dangerous maneuvers” against a routine rotation and resupply mission to
GLOBAL COMBAT AIR PROGRAM: The potential purchasers would be limited to the 15 nations with which Tokyo has signed defense partnership and equipment transfer deals Japan’s Cabinet yesterday approved a plan to sell future next-generation fighter jets that it is developing with the UK and Italy to other nations, in the latest move away from the country’s post-World War II pacifist principles. The contentious decision to allow international arms sales is expected to help secure Japan’s role in the joint fighter jet project, and is part of a move to build up the Japanese arms industry and bolster its role in global security. The Cabinet also endorsed a revision to Japan’s arms equipment and technology transfer guidelines to allow coproduced lethal weapons to be sold to nations
Thousands of devotees, some in a state of trance, gathered at a Buddhist temple on the outskirts of Bangkok renowned for sacred tattoos known as Sak Yant, paying their respects to a revered monk who mastered the practice and seeking purification. The gathering at Wat Bang Phra Buddhist temple is part of a Thai Wai Khru ritual in which devotees pay homage to Luang Phor Pern, the temple’s formal abbot, who died in 2002. He had a reputation for refining and popularizing the temple’s Sak Yant tattoo style. The idea that tattoos confer magical powers has existed in many parts of Asia
ON ALERT: A Russian cruise missile crossed into Polish airspace for about 40 seconds, the Polish military said, adding that it is constantly monitoring the war to protect its airspace Ukraine’s capital, Kyiv, and the western region of Lviv early yesterday came under a “massive” Russian air attack, officials said, while a Russian cruise missile breached Polish airspace, the Polish military said. Russia and Ukraine have been engaged in a series of deadly aerial attacks, with yesterday’s strikes coming a day after the Russian military said it had seized the Ukrainian village of Ivanivske, west of Bakhmut. A militant attack on a Moscow concert hall on Friday that killed at least 133 people also became a new flash point between the two archrivals. “Explosions in the capital. Air defense is working. Do not