Ireland eyes 10-year bond issue, easing of austerity

DUBLIN Mon Dec 16, 2013 4:15pm EST

1 of 4. Irish Minister for Finance Michael Noonan gestures during an interview with Reuters at his offices in central Dublin December 16, 2013.

Credit: Reuters/Cathal McNaughton

DUBLIN (Reuters) - Ireland, the first euro zone member to successfully exit its bailout, will return to debt markets with an issue of 10-year paper in early 2014 and may have space to ease austerity in its next budget, its finance minister said.

Ireland completed its European Union/International Monetary Fund bailout program last week and its economic progress and debt sales will be closely monitored for pointers on how easily other bailout recipients Portugal, Greece and Cyprus may fare.

Dublin, which is already funded into 2015, will kick off with a sale of 10-year debt in late January or early February and investors are already asking about longer-dated paper, Finance Minister Michael Noonan said in an interview.

"We'll go back into the market at the end of January or early February, probably a 10-year bond again and we will probably go into regular treasury bill auctions then," Noonan said at Dublin's finance ministry on Monday.

"I was in London talking to investors and sources in the insurance industry and pension funds seem to have some degree of appetite for longer maturity Irish paper so I have asked the NTMA (debt agency) to examine that."

EASING AUSTERITY

The bond sale would be Dublin's first debt issue since March when it sold 5 billion euros of 10-year paper, its first 10-year issue since its bailout, giving it enough cash on hand to remain out of bond markets for the rest of this year.

Ireland's exit from the bailout and signs that its economy is slowly picking up speed suggest there will be room to further ease austerity in 2014 and budget cuts could amount to less than the planned 2 billion euros, he said.

Noonan has said this year's budget gap should be narrower, expecting it to come in it at 7 percent of gross domestic product (GDP) versus a target of 7.5 percent. He may look at adjusting income tax bands to try and help the country's 4.6 million people, who are still suffering from unemployment above 12 percent and a sluggish economy that is expected to post only marginal growth this year.

There are signs the country is picking up steam - the jobless rate is down from a 15.1 percent peak in 2012, property prices have started to rebound and the government sees GDP growing by 2 percent next year.

The government has said that higher-than-forecast tax revenues this year should enable it to beat its budget deficit target and will feed on through into next year, meaning it could also beat its deficit forecast of 4.8 percent of GDP for 2014.

"If we were to beat the 4.8 target (for 2014), it makes the budgetary position easier so that 2 billion seems to me now to be the outside of the adjustment that we have to make and already the adjustment is looking somewhat less than that," Noonan said.

And though national debt remains among the highest in the EU, at 124 percent of GDP, Noonan does not feel pressure to sell the state's stakes in the rescued bank sector - funds that could be used to pay down that debt.

Bank of Ireland (BKIR.I) repaid 1.9 billion euros to the state this month to close in on fully returning to private hands. Noonan said he had received enquiries on Allied Irish Banks (ALBK.I) but wanted to be "loud and clear" that there was nothing for sale in the nationalized lender at present.

He said he expected a restructuring plan for the country's third and smallest domestic lender, permanent tsb (IPM.I), to be either agreed or modified by the European Commission early in the New Year.

"We may not even sell in the lifetime of this government, we're under no pressure financially or politically to sell," the minister, who also served as a minister during the 1980s, said. The next election is due by early 2016.

"There isn't a timetable. What there is, is a policy principle that the state has no interest in running banks in the long term and when the time is right and the price is right, we'll sell our shareholdings in all the banks."

(Editing by Susan Fenton)

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