Europe worried about Spain not Ireland - Irish finance minister

DUBLIN Sun Jun 26, 2011 2:55pm BST

1 of 2. A sculpture showing the euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt, April 1, 2010.

Credit: Reuters/Kai Pfaffenbach

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DUBLIN (Reuters) - Europe is more concerned about the fallout on Spain and other large euro zone economies from the Greek financial crisis than on Ireland and Portugal, which are already receiving emergency funding, the Irish finance minister said on Sunday.

Investors pushed Irish and Portuguese borrowing costs to fresh euro-era highs last week amid uncertainty over how Greece can avoid default but contagion concerns have heaped pressure on Spanish and Italian yields.

"The European authorities are more worried about countries like Spain than they are about Ireland and Portugal," Michael Noonan told state broadcaster RTE.

"The authorities that I have spoken to believe they can prevent contagion spreading to Ireland and Portugal but they have some concerns about the bigger European countries, and they are going to draw the line there."

"I presume they will bring other policy instruments forward as necessary," he said without elaborating what those measures would be.

Greece's government must win a parliamentary vote on austerity measures this week if it is to avoid default and Noonan said he believed Prime Minister George Papandreou would prevail.

But he said it was unclear whether Athens would be able to generate the additional revenues earmarked in the austerity package.

"I would be more worried about Greek failure to implement what they have agreed to in the autumn because with the best will in the world their administration doesn't seem to be very effective.

"Tax in Greece and their collection system doesn't seem to be very good and it's a matter of speculation as to whether they can fulfil the commitments they are making or not."

Ireland's government has said it will make a tentative return to debt markets in the second half of next year but it has also insisted it has enough funds from its existing 85 billion euros EU-IMF bailout to see it through to the middle of 2013.

Noonan said the savings Ireland was making on imposing losses on junior bondholders in the country's banks could help fund the sovereign till the end of 2013.

"We have sufficient money under the bailout programme in all eventualities to mid-2013 but there is the possibility of having extra money for the second half of 2013."

Irish consumer demand dropped 1.9 percent in the first quarter, on a seasonally adjusted basis, data last week showed but Noonan said he was hoping anecdotal evidence of a rise in tourism would help revive domestic demand.

"We think that there will be growth on the retail side through tourism."

(Created by Carmel Crimmins; editing by Sophie Walker)

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