Ireland bailout likely before end of 2011 - Reuters poll

LONDON Thu Nov 11, 2010 8:04pm GMT

Ireland's Leader of the Opposition Enda Kenny of the Fine Gael party (L) buys sausages from a butcher while on a campaign stop for local Donegal south west candidate Councillor Barry O'Neill in Donegal, Ireland November 11, 2010 REUTERS/Cathal McNaughton

Ireland's Leader of the Opposition Enda Kenny of the Fine Gael party (L) buys sausages from a butcher while on a campaign stop for local Donegal south west candidate Councillor Barry O'Neill in Donegal, Ireland November 11, 2010

Credit: Reuters/Cathal McNaughton

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LONDON (Reuters) - Ireland will seek international rescue funds before the end of next year, according to two thirds of economists and bond strategists polled by Reuters on Thursday.

Twenty of the 30 analysts surveyed said Ireland would not make it through to the end of 2011 without tapping external funds. The value of any bailout would be around 48 billion euros (40 billion pounds), according to a median of forecasts from the 10 respondents who gave a figure.

Irish policymakers have said the debt-burdened former 'Celtic Tiger' economy can mend itself without outside help but ballooning Irish government bond yields suggest investors think otherwise.

"It's not just an Irish problem, it's a European problem," said Alan McQuaid, chief economist at Bloxham Stockbrokers.

Irish government funding is covered through to the middle of 2011, and next month's austerity budget could be crucial in convincing investors it can affordably return to debt markets next year.

"I don't think it'll be like Greece," said McQuaid, referring to the 110 billion euro rescue package raised for Athens in May. "But it's just the actual stigma that Irish people will be looking at.

The respondents comprised economists at research institutes and top Irish and European banks, and bond strategists at large dealers.

Last month, a snap Reuters poll showed a slim majority of economists thought Ireland would likely avoid tapping the European Union or International Monetary Fund for a bailout next year.

Since then, market confidence in Ireland's ability to cope with its huge debt burden has fallen significantly.

On Thursday, the cost of insuring Irish debt against default hit a record high and the 10-year Irish bond spread over equivalent German debt -- another measure of perceived risk -- reached 685 basis points, the highest since the euro was introduced.

Irish Finance Minister Brian Lenihan described the surge in borrowing costs as "very serious" on Thursday, and the EU said it was ready to act should Ireland require a rescue from euro zone partners.

"Going off current markets prices ... if the situation stays the same as it is now, it wouldn't be a surprise if they did have to apply to the fund," said Eric Wand, economist at 4Cast.

"They don't need the money until the end of Q2, but they're obviously going to need funds after that."

(Polling by Bangalore Polling Unit; Additional reporting by Paul Day in London and Carmel Crimmins in Dublin; Editing by Ross Finley and John Stonestreet)

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