Analysts at JPMorgan Chase & Co think that the EU has to reduce the 5.8% average interest rate on 85 billion-euro ($113 billion) emergency aid to Ireland by 50% or 250 basis points. Otherwise, the indebted country won’t be able to get out of the crisis without debt restructuring. The borrowing rate is critical given that economic growth will be very weak for some time due to severe fiscal tightening.

Specialists at Barclays Capital share the opinion that the funding costs for Ireland are to be lowered by 200-300 basis points.

According to the IMF forecast, Irish economy will add less than 1% this year and below 2% in 2012. EU estimates that the ratio of Irish debt to GDP will reach 114% next year, while in 2007 it was equal only to 25%. The difference in yield between 10-year Irish debt and benchmark German bonds staying above 500 basis points, compared with an average of about 60 during the past decade.

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