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The cost of purchasing insurance against Irish Government bonds rose to record high levels on Friday, having tripled in just one week as fears mount that the Irish Government may default on its rising debt.
The cost of insuring Irish debt hit 350 basis points on Friday, meaning that for every £100 of debt it would cost £3.50 to insure against default. A year ago it would have cost 10p to insure every £100 of Irish debt.
Ireland, like so many other nations around the globe are experiencing growing problems related to the banking industries. Ireland’s current pledges to support its banking sector amount to 220% of the Ireland’s annual economic output. This enormous commitment to support the banks is putting Ireland in a dire situation of possible default.
With the recent scandal at Anglo Irish Bank concerning undisclosed loans the fear is rising that the Irish Government will be hit with much more ‘yet to be disclosed’ losses and will push Ireland over the edge into default.
Ireland is set to borrow an additional €15 Billion ($19.3 Billion US) this year and Ireland’s national debt will reach €70 Billion ($90 Billion US). A default by Ireland would have wide sweeping implications for the EU Union. This comes on top of other nations believed to be on the brink of default, such as Ukraine and Russia and follows the disastrous financial failures in Iceland just a few months ago that toppled the Icelandic Government.
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