All about business

Irish Finance Minister Brian Lenihan said that the weakness of the pound has hurt the competitiveness of his economy, which is suffering a “hangover” after a decade-long boom.

“Sterling has depreciated against the euro and therefore there is a competitive disadvantage to Ireland,” Lenihan said in a speech in London. Separately, he said in an interview with Bloomberg Television that “we’re now at the hangover stage as the party went a little too far.”

The pound has dropped 15 percent against the euro in the last year, making it harder for Irish exporters to sell goods in Britain and prompting some consumers to start shopping across the border in Northern Ireland. That’s inflicting more pain on the country as it endures the biggest contraction among the 16 euro nations.

While the end of a decade-long boom has left Ireland with a soaring budget deficit and the riskiest debt in the region, Lenihan said the government would pursue fiscal discipline. He pledged to keep this year’s budget gap close to the government’s forecast of 9.5 percent of gross domestic product.

The deteriorating fiscal position has prompted both Standard & Poor’s and Moody’s Investors Service to downgrade the outlook on Ireland’s credit rating to “negative” from “stable” this year.

‘Corrective Action’

“The public finances have come under pressure,” Lenihan said. “We’re absolutely determined to take corrective action credit reports.”

Credit-default swaps on Irish government debt, which reached a record 396 basis points on Feb. 17, have since dropped to 280 points. Lenihan said “I’m confident we can fund ourselves.”

Speaking at the same event, Oliver Whelan, director of funding and debt management at the National Treasury Management Agency, said the government had had “no difficulty” selling bonds.

The government is “setting up a treasury bill program in the very near future just to have another funding option in the short-term market,” Whelan said in London today. “So far we have seen no difficulty in being able to sell our bonds.”

The finance minister ruled out the option of Ireland leaving the euro-area. “Membership of a strong currency is essential to Ireland’s economic wellbeing,” he said. He also said that continental help for any stressed country would be specific to the nation involved.

Ireland’s government is even more pessimistic than the European Commission, which forecast the country’s economy to shrink by 5 percent this year. Prime Minister Brian Cowen expects a 6.5 percent contraction in 2009, he said last week, cutting a forecast issued less than two months earlier.

“As we were first to go into recession we’ll be first to get out of it,” said Lenihan.

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