Ireland seen as a safe haven through European debt tensions
Tensions in European bond markets have intensified this week, rioting in France underlining the political difficulty of implementing measures to rein in the budget deficit, expected to equal 5.4% of GDP this year. The yield on 10yr French OATs has now pushed through 5%, the spread against Germany widening to 173bps this morning. Speculation the ECB might intervene has reflected the apparent contagion spreading into other European countries.
In this context, the performance of Irish government bond yields has been encouraging, the 13bp spread against Germany actually narrowing over the past 3 months. Ireland is now perceived as a relative safe haven, reflecting the robust performance of the public finances – one of only a few European countries expected to run a budget surplus in 2026.
That said, there is no room for complacency. The era of country-by-country corporate tax reporting has begun – revealing that just three companies – Apple, Microsoft and Eli Lilly – likely accounted for close to half of Ireland’s corporate tax take of €35bn in 2025 and well in excess of the expected government surplus of €6.7bn in 2026.
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