THE Government has played down fears that a second EU/ IMF bailout may be necessary next year, despite a Cabinet minister's apparent claim to the contrary.
Transport Minister Leo Varadkar was reported as saying he thought it was "very unlikely" that Ireland would be able to go back to borrowing on the bond markets in 2012.
"I think it might take a bit longer ... 2013 might be possible, but who knows?" he said.
"It would mean a second programme (of loans from the EU/IMF). Either an extension of the existing programme or a second programme. I think that would generally be most people's view," Varadkar was reported as saying.
He is the first Cabinet minister to cast doubt in public about the Government's aim of returning to the bond markets next year. His comments were picked up and widely reported by international news media and were likely to alarm some investors, observers said.
Later, Varadkar attempted to play down the significance of his comments.
"My quote was in response to a hypothetical scenario," he said. "I am basing my spending plans, prudently I believe, on the more pessimistic scenario.
"Nobody really knows and there are no crystal balls."
A Government spokesman also attempted to reduce the impact of his remarks, which were made during a briefing to reporters in recent weeks, describing the comment as "a hypothetical answer to a hypothetical question".
Officials from Finance Minister Michael Noonan's Department insisted the Coalition's firm plan was still to return to borrowing on the bond markets in 2012.
The Department of Finance stressed there would be no change in the Government's plans.
Observers said that another bailout would involve even deeper cuts and more increases in taxation, leading to further contraction in the economy.
Tanaiste and Minister for Foreign Affairs Eamon Gilmore said yesterday that the Government was going to honour the terms of the agreement between the previous administration and the EU, ECB and IMF.
"There is no other position that would be responsible for the Government," he said. "We are not going to unilaterally default on that agreement. We are going to honour our commitments," he said.
Gilmore said the Government had undertaken to renegotiate the agreement to bring it into line with the programme for Government, having been highly critical of its terms, and negotiations on the level of the interest rate on the bailout are currently underway.
"It was never going to be the case that the renegotiation of the agreement was something that was going to be done in one big bang. It was always something that was done incrementally," he told RTE Radio One's This Week.
Reports today pointed out that, ironically, most independent economists agree with Varadkar's comments, with many predicting that Ireland is unlikely to resume borrowing until 2014.
That would force the Government to borrow from the EU's permanent rescue fund, which will begin in 2013.
However, observers said his comments immediately caused a problem for the Government, implying that there was a view within Government that a second bailout was needed.
Varadkar's suggestion that Ireland will fail to meet its target comes as investors are already panicking about the possibility that Greece will default this summer, sparking fears of a new crisis for the euro.
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