‘Unfounded worries’ over Ireland will vanish: Bank of Spain

The “unfounded worries” over the Irish economy will be dispelled following Dublin’s “adequate response” to its fiscal squeeze, Bank of Spain governor Miguel Angel Fernandez Ordonez said Monday.

Ireland admitted earlier Monday that it had “ongoing contacts” with “international colleagues” on its budget woes but denied reports that it was seeking EU assistance similar to that received by Greece earlier this year.

Fernandez Ordonez, who is also a member of the European Central Bank’s governing council, said it was not his place to tell Ireland what to do.

“We can expect that the adequate response of the Irish authorities as well as the clarifications provided by France, Germany, Britain, Italy and Spain at the G20 summit in Seoul over the mechanisms in place to resolve the EU (debt) crisis will help to clam markets and dispel unfounded worries,” he added.

The finance ministers of EU heavyweights Britain, France, Germany, Italy and Spain issued a joint declaration Friday insisting that bond market jitters over a future bailout fund were misplaced since any new bailout mechanism would only come into effect after mid-2013.

Ireland is heading for a public deficit of slightly more than 30 percent of output this year, ten times the EU limit, and on eurozone debt markets the interest rate which Ireland would have to pay when it next borrows money has shot up to about 9.0 percent.

Spain, like Ireland, is struggling with burgeoning public debt and deficit levels and as a result have had to pay ever higher returns to bond buyers in order to raise funds.