Joe Costello (Dublin Central, Labour)
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Question 91: To ask the Minister for Finance his views on the spread on recently raised Irish sovereign debt above the benchmark German bonds; if he expects these spreads to ease or to become more pronounced over the 2009 to 2010 period; the expected impact of elevated bond spreads on the cost of financing the national debt in 2009 and 2010; the expected cost in nominal terms and as a proportion of GDP for 2009 and 2010, with comparative figures for 2007 and 2008; and if he will make a statement on the matter. [27989/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The spread in the cost of funding that Ireland must pay over the German benchmark rate began to increase towards the end of 2008 and rose sharply in January 2009 as a result of a number of global and domestic factors. These included international concerns about the prospect for continued economic contraction in Ireland and internationally, the deterioration in the public finances, and uncertainty about the cost to the Exchequer of restructuring the Irish banking sector. While spreads have fallen from the peak levels, they remain volatile. The National Treasury Management Agency advise that it is not possible to disentangle the precise effects of the different factors behind these spread moves or to quantify them. For illustrative purposes, the NTMA have estimated that an increase of 10 basis points in the spread would increase the cost of funding the overall 2009 borrowing requirement by around €29 million in a full year.

While, as outlined above, a number of factors have impacted on the spread in the cost of funding, the Government is taking the necessary corrective actions to address the deterioration in the public finances and ensure the stabilisation of the financial sector. It is expected that these actions will assist in restoring the confidence of international investors and will have an impact on the longer term debt servicing costs.

The Supplementary Budget forecasts as advised by the NTMA for 2009 and 2010 for debt servicing costs, in nominal terms and as a proportion of GDP, along with comparative figures for 2007 and 2008 are set out as follows: