From Socialist Voice, October 2010

Sale of government bonds reflects lack of confidence and structural weakness


The National Treasury Management Agency set out on 23 September to sell €500 million in government bonds in order to ease the country’s debt obligations. However, this sale did no go as well as hoped, as the NTMA managed to sell only €400 million worth of the bonds, with the cost of Irish debt rising to a record figure, increasing the likelihood that Ireland will default on its sovereign debt.
     In response to this, international investors—acting, as they always do, like sheep—jumped to purchase particular credit-default swaps. These instruments, whereby a buyer pays certain amounts to a seller in exchange for a lump-sum pay-out once a certain credit event happens, is also likely to affect negatively the cost of Irish borrowing and to further erode confidence in the economy and consequently to lead to the event we suspect they are betting on happening: Ireland defaulting on its debt obligations.
     Socialist Voice has long expressed serious concern that the need of capitalism to save the financial system—its primary source of investment and profit—has made the risk of sovereign bankruptcy very real, especially in peripheral countries, such as Ireland.
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