Ireland can only hold out to roll over its sovereign debt until mid-year 2011 if its banks receive unlimited ECB funding. In an effort to get Ireland on board for a bailout, there is the implict threat that the ECB could cut off that source of funds.
The ECB wants politicians to take greater responsibility for fighting eurozone flashpoints. The suspicion in Dublin, however, is that the ECB is pressing Ireland to accept a bail-out as a way to reduce the ECB’s exposure to the Irish crisis.
An interesting game of chicken is underway but ultimately Ireland will take the money, whether they like it or not…
EUR/USD is coming under fresh pressure from rising US yields and the ECB’s subtle threat.
