THE INTERNATIONAL press was in agreement yesterday that Thursday’s economic figures were disappointing for the country, giving further fuel to investor concerns over Ireland’s financial health.
The figures revealed that, contrary to expectations, the economy contracted in the second quarter of this year, with a fall of 1.2 per cent in gross domestic product.
The development made the front page of the Wall Street Journal's European edition yesterday morning, with the paper saying the news of the economic contraction was "startling" for investors.
It speculated that the Government might have to introduce tougher budget measures to trim the budget deficit, and said in recent weeks investors had begun to fear a Greek-style bailout could be on the cards for Ireland.
The paper noted that this was unlikely to happen at present as Ireland had funded its budget through to the middle of next year.
The article also highlighted the austerity measures introduced in Ireland and their likely impact. It raised doubts about the wisdom of taking cash out of the economy and hampering consumers.
The paper quoted Glasgow-based portfolio manager Stuart Thomson as saying that the austerity measures would hurt the economy, and economic reality was “going to rear up and bite the politicians”.
This was partly echoed by the Daily Telegraph, which said the data could renew concerns that austerity measures risked "tipping the economy into a self-reinforcing spiral".
It noted that although the State had been praised for “grasping the nettle” early and implementing cuts, any reward for its “good behaviour” had yet to come.
The Guardiansaid the Irish figures were "a stark warning" to governments across Europe, including Britain, and were being used by the Labour Party in that country as a warning of "austerity overkill".
The New York Timesdescribed yesterday's data as a "setback" for the "ailing" economy. The markets saw the figure as a sign that the economy was heading for a "double-dip" recession, the paper said, and the figures showed how hard it would be for governments in countries such as Greece, Portugal and Spain to stimulate recovery in their economies.
The Financial Timesgave less prominence to the figures, carrying them in the markets and investment pages, where it said the cost of insuring the country's bonds against default had risen to record levels. It quoted analysts as saying there were worries that the Government had "bitten off more than it could chew" with the bailout of banks.
On the back page of the Financial Timesa market report said Ireland's credit outlook had taken a turn for the worse, with fears for the country's financial situation compounding disappointing economic releases from the US and Europe. Analyst Natascha Gewaltig said the disappointing growth figures added to prevailing risk aversion.
German publication the Süddeutsche Zeitungsaid not all of Ireland's problems were of its own making, with subsidies masking issues like the rapid growth in Dublin's economy and slower growth in rural areas.
It said the Celtic Tiger had been “reeling with a dangerous virus” – growth at any price – for some time, and the financial crisis finished the country off.
