Ireland's Austerity Sends Things Quickly Into Reverse, Spooks Eurozone
The Guardian
Irish economy faces double dip recession
Ireland's economic recovery stalls as figures reveal national output dropped by 1.2% in the second quarter of 2010.
Ireland's recovery from the deepest recession of any eurozone country came to a quick and unexpected end today when the Irish government announced that national output dropped by 1.2% in the second quarter of 2010.
After posting an increase in growth in the first three months of the year, official data showed that the former "Celtic Tiger" sank into a double dip recession in the spring.
News of the relapse rattled the financial markets and put additional pressure on Dublin's unpopular coalition government, which had previously insisted that its tough budget cuts were helping to stabilise the economy. Ireland has also been hailed by Britain's coalition government for its decision to tackle the double-digit budget deficit left by the collapse of its property bubble with immediate and deep cuts.
Investors warned that fears about Ireland's ability to generate growth would push up the interest rates on its debt.
Jeremy Cook, chief economist at currency dealer World First, said: "When I saw the figure I honestly thought it was a misprint; it's just horrible. Trading today had kicked off with rumours of Anglo Irish Bank defaulting on debt and has led to the Irish CDS (credit default swap) - insurance against the Irish government defaulting - move to a record 5%. To put that in context, the market believes that Ireland is twice as likely to default on its debt as Vietnam." ...