Ireland had hoped that the European Central Bank (ECB) would announce a new funding plan on Thursday just after the results of stress tests on Ireland’s banks were made public.
Such an announcement would have presented the problem and solution in a neat package, meant to reassure markets that Ireland did indeed have a handle on its debt woes at last. However, Reuters reported that, while the ECB did suspend ratings requirements from Irish banks, it did not announce the comprehensive medium-term funding facility that Dublin had hoped for. Still, on Friday Ireland’s banks’ senior debt made a strong showing in early trading after the announcement by Ireland’s finance minister that haircuts would be unwise.
The long-awaited stress tests, as previously reported by AdvisorOne, revealed that Irish banks still had deep debt to deal with. The hoped-for funding facility fell victim to disagreements within the governing council of the ECB; the lack of a plan raises the specter of another severe downgrade from Standard & Poor’s.