The release this week of exchequer returns to the end of May may help settle jitters about Ireland's ability to pay back its creditors even as the stripping from Spain of its elite rating turned up the heat on the eurozone's debt crisis.
Sovereign debt markets continued last week to put Ireland in the spotlight as key sovereign interest here rose again to become the most expensive in the eurozone after Greece. Markets pushed the annual interest rate Ireland must pay to borrow new money for a ten-year term to 4.8%, compared to the 4.6% rate the markets demand that Portugal pay.
Sovereign debt markets continue to fret about individual countries in the eurozone despite the bailout of Greece and the huge guarantees put in place for all other eurozone countries earlier this month. The rescue by Spain, which was stripped of its AAA rating, of savings bank CajaSur led to renewed fears about the debts of Irish banks.
But Rossa White, chief economist at Davy Stockbrokers, said Wednesday's release of the revenues the government raised to the end of May will likely be the start of comforting news for the public finances for the remainder of the year. He predicted that the amounts the government raises in taxes month by month in the second part of the year will likely exceed the Department of Finance's own budget targets for the first time in a long time.
Because May is an important month for the collection of VAT, the Department of Finance targets suggest the government will raise over €12.2bn in revenues for the first five months, up sharply from over €9.6bn it raised to the end of April.
The effects of the economic slump will, however, show up dramatically in the revenue figures for earlier years. By the end of May last year the government had already raised over €15bn in taxes and revenues and had collected €18.6bn in the same period in 2008.
Meanwhile, international commentators continue to put Ireland in the frame for a potential debt crisis.
The Market Beat section of the Wall Street Journal online edition said last week that investors should keep "an eye on Ireland's beleaguered banks" amid fears they will generate more losses for the Irish taxpayer.
"The Emerald Isle has managed to make major cuts to public-sector wages without sparking severe civil unrest... As a result, investors have largely given Ireland a pass, despite its budget deficit being the biggest in the euro area, and focused their worries instead on Portugal and even Spain," said the WSJ online.