Finally it happened. After resisting for sometime Ireland eventually decided to compromise and accept the financial aid from the European Union to the sum of dozens of billions (EUR) to support its banking system.
The world community breathed with relief.
The Irish prime minister’s speech at the end of the last week was met with general approval as until the last minute the Irish authorities had been trying to convince everybody that they didn’t need any external help.
It is quite explainable because over the last 10 years the Irish economy has been a role model in terms of how to build the economy in the EU countries. Yet, they do not want to “come back to earth”. The fact that the financially stable country suddenly went broke certainly needs considering as the situation is really critical.
One of the reasons for it was the rapid decline in the housing market, which undermined the banking system making numerous Irish banks fall into the debt abyss. The government allocated 50B euro to help the banking system, which led to the budget deficit growth.
Taking into account Ireland’s reputation and the service it rendered to the EU in terms of forming a favorable image, numerous analysts are inclined to consider Ireland to be the main threat to Euro. Yet they forget that Spain and Portugal cause serious problems as well. Here it is, a simple answer to the question why everyone were looking forward to Ireland accepting financial aid and why Jean-Claude Juncker, President of the Euro Group, assured the world community that Euro was no longer subject to the complex crisis.
Unofficial sources report that Ireland will get almost 90B Euro to stabilize its economy. The first part of the financial aid will be provided in mid December 2010.
There is no way for Ireland to avoid introducing austerity measures, implying the reduction of the budget deficit by over 15B Euro, down to 3% of the national GDP, which is the limit for all the EU participants.
However numerous key moments of the agreement are not determined yet, with the Irish government’s plans playing the key role here. They are to be published soon.
In terms of technical analysis, EURUSD is testing 1.3100. The level is currently acting as support for the upswing currently developing against last week’s fall, Maxim Gun, explains. He is the head of the Volume Analysis Department of Masterforex-V Academy.
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