Does Ireland Need IMF Assistance?

The euro exchange rate fell this morning by more than a cent against the dollar, with traders citing a media report that the Irish Prime Minister stated that the country would need assistance from the International Monetary Fund (IMF) if the economic crisis worsens.

Traders refer to a report from Bloomberg News, which relayed a report from the TV station RTE that Irish Prime Minister Brian Cowen might call on the IMF for help. "This is certainly negative for the euro. Until now, only developing countries have sought assistance, and if even one member of the eurozone goes in that direction, it could affect credibility and pressure the currency," says currency analyst at Brown Brothers Harriman, Audrey Childe-Freeman.

The euro exchange rate now stands at 1.3225 dollars, after reaching 1.320 dollars during the morning. Against the yen, the euro exchange rate fell to 118.15 yen. In relation to the British pound, the European currency dropped to 91 pence. Meanwhile, the Irish embassy in Tokyo, where Cowen is on a trade mission, immediately denied the media report as "completely incorrect." The statement noted that Cowen was discussing the policies the Irish government is undertaking to ensure that the country overcomes economic difficulties.

On European stock exchanges, after a slight initial rise, stock prices sharply fell due to investor concerns about the banking and mining sectors. The banking sector is under pressure due to new bad news indicating the consequences of the credit crisis. This morning, British Barclays announced the layoff of 2,100 employees from its investment banking division, or 7 percent of the total workforce. The London FTSE index was down about 1.5 percent around 11 a.m., while the Paris CAC and Frankfurt DAX indices were down approximately 0.7 percent.

"We started in slight positive territory, but now stock prices are falling. The market is still at a crossroads between hope and fear. On one hand, we have stimulus measures that instill hope that the economic situation will improve in the second half of the year, and on the other hand, weak macroeconomic data continues to flow into the market, and the earnings season for companies has started disappointingly," emphasizes Phillipe Gijsels, strategist at Fortis Bank. (H)