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Irish economists see Lisbon Treaty sailing through - poll

DUBLIN (Reuters) - Ireland will easily pass the Lisbon Treaty in a referendum this week, economists polled by Reuters unanimously predicted on Thursday, warning that rejection of the EU charter would hike borrowing costs.

An Irish flag flies next to an European Union flag near the EU Commission headquarters in Brussels June 13, 2008. REUTERS/Francois Lenoir

Brussels needs Ireland to ratify the treaty to make the bloc a stronger player on the world stage and analysts expect Yes votes to overshadow No votes by a median margin of 14 percentage points compared with last year’s poll when they rejected it by 53.4 percent to 46.6 percent, shelving its introduction.

A second thumbs down would plunge the EU into crisis and lose Ireland valuable goodwill during a severe recession when it is relying on foreign investors to fund its spending.

“A Yes vote would keep the positive momentum behind improving Ireland’s credibility internationally. A No vote is unthinkable,” Rossa White, chief economist at Davys Stockbrokers said.

“We are already ‘persona non grata’ in Brussels. We would lose any influence we have within Europe. That could jeopardise our corporation tax advantage and would make many foreign companies think again about their investments here.”

Four of the eight economists who expect a Yes vote estimated on a median basis that the spread between Irish and German 10 year debt would increase by 50 points if the result went the other way.

Irish debt yields have roughly halved from a 16-year high of 290 basis points in March as Dublin has moved to tackle twin fiscal and banking crises.

The government needs to get its junior coalition partner, the Greens, to agree to a “bad bank” plan to purge its lenders of 77 billion euros of risky property loans and five out of six economists expect the party to vote in favour of the plan on October 10.

The Greens will pull out of government, likely triggering a snap general election, if their members reject either the “bad bank” plan or a revised programme for government.

Five out of six economists ruled out an election before the next budget in December and the remaining one said it was unlikely.

BUDGET 2010 LOOMS

Ireland is suffering one of the worst recessions in the western world but resilience in its exports, retail sales and a sharp slowdown in the growth of joblessness have reinforced the view that the downturn will end faster than expected.

Economists expect the economy to return to growth, on a quarterly basis, in July-Sept, and they predict Gross Domestic Product (GDP) to shrink by 7.45 percent this year, in from 7.95 percent previously and an improvement on May’s worse case scenario of an 8.5 percent reverse. [ID:nL1571883]

“Many of the more recent data releases have indicated that the pace of contraction in the economy has eased significantly compared to earlier in the year,” Deirdre Ryan, economist at Goodbody Stockbrokers said.

Data on Thursday showed the numbers claiming unemployment benefit rising by just 600 people in September and economists now expect the rate of unemployment to hit 13.15 percent at the end of this year, in from 13.95 percent in the previous survey.

The economists in the latest poll maintained their projections for this year’s budget deficit to reach 11.10 percent of GDP, above the government’s target of 10.75 percent, set to be proportionately the worst in the euro zone this year.

To get its budget deficit back to the EU’s 3 percent limit, Ireland’s is aiming to achieve savings of 4 billion euros in its 2010 budget, mostly by tightening spending.

The Irish Congress of Trade Unions (ICTU) on Wednesday called on its 650,000 members to demonstrate on November 6 against government cutbacks but economists warned that tough decisions would have to be made.

“Budget 2010 is certainly teeing up to be the most difficult in history, and significant spending cuts will need to be pushed through to ensure that the consolidation plan remains on track,” Goodbody’s Ryan said.

Editing by Carmel Crimmins

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