Ba-Nama-Rama

Once the star economy of the European Union, Ireland has experienced a dramatic reversal of fortune as the government struggles with a bleed in public finances and rising unemployment, a situation compounded by a fragile banking system overextended with bad loans to property developers.

"International investors do realize that Ireland is not going to default and will not be allowed to default," said Bloxham Stockbrokers chief economist Alan McQuaid. "As such, it's hard to see Ireland having much difficulty selling government bonds over the remainder of 2009."

Ireland has generated €14.3 billion of government bonds so far this year out of a target of €25 billion. The NTMA has said it will probably issue a third syndicated bond later this year, as well as continuing to hold its regular monthly bond auctions.

Ireland's 2009 debt-to-gross domestic product ratio is expected to hit 59%, up from 43% -- low by European standards -- but some observers believe that ratio will rise to over 100% once the government issues bonds to Irish banks as part of the National Asset Management Agency, or NAMA.

The Irish government announced last month that it is setting up NAMA, or the "bad bank," to take potential exposure of €80 billion to €90 billion in bad debt off banks' books. It will be the first real test of an industrywide, government-sponsored "bad bank" in the euro zone.

Economists say Ireland's export performance and fiscal position will reap the benefits of any upturn in the U.S. and U.K. economies, given the importance of these two Group of Seven leading industrial nations to Ireland's trade performance, though most observers agree it will take many years to get out of the red.

The NTMA is the asset and liability management arm of the government. Its main role is that of borrowing for the government and managing the national debt, but its remit has been expanded greatly to management of the National Pensions Reserve Fund and the forthcoming "bad bank."

Ireland's national debt at the end of May was €61 billion.

Wall Street Journal

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