ANALYSIS:There is a long way to go and the debt problem could still conclude in a Europe-wide meltdown, writes DAN O'BRIEN,Economics Editor

NEITHER IRELAND nor Europe is anywhere near being out of the woods. But the seven days from last Friday to yesterday amount to the best week in a very long time, perhaps even at any time since the Irish and international recessions began four years ago.

Yesterday morning’s raising of €500 million by the State was a success by every measure. The European Central Bank’s interest rate cut, announced a couple of hours later, is important in more ways than one. And the advance of a week ago, when euro zone leaders made the most substantive move yet to address the euro zone crisis, for once has the potential to live up to the “game-changer” hype.

There is a long way to go and the crisis could still easily end in a Europe-wide meltdown. For Ireland, sovereign default over the medium term remains a real possibility. And a second bailout is still more likely than not. But the probability of all three outcomes is lower than eight days ago.

The National Treasury Management Agency’s treasury bill auction could hardly have gone better. Demand was high and the interest rate offered low. Most of the bills were bought by foreigners, giving the clearest hard evidence yet that sentiment towards Ireland has changed.

The NTMA boss would not be drawn on budgetary issues other than to say that budget 2013 will be one of the key factors in maintaining the momentum towards full market re-entry.

That will not be helped if Ministers are allowed spin and speculate on the budget’s contents as they did last year from summer to December when its details were unveiled. It is imperative that the Taoiseach and Tánaiste act to stop their Cabinet colleagues playing political games when the stakes are so high.

If Wednesday’s figures on unemployment put something of a damper on things, the industrial production numbers show that the sector is holding up well despite weak demand in foreign markets. Europe-wide demand will be supported by the interest rate cut and the European Central Bank’s decision to pay nothing on the cash that banks park with it.

It would not be wrong to criticise the ECB action as too little too late – a 50 basis point cut should have happened six months ago. But there are mitigating circumstances. Frankfurt’s view has been that the more it does, the less governments will do to address the wider euro crisis. There is good reason for the bank to hold this view.

Its unlimited three-year cheap lending to banks, done in two large dollops at the end of last year and the beginning of this one, had a calming effect on the markets. It caused a rekindling of politicians’ hopes that the crisis will solve itself. It won’t.

The big decisions in Brussels reassured the central bankers in Frankfurt. Not one of the 23 members of the bank’s governing council opposed the rate cut. Could it be that the euro’s death spiral has been broken and the main players have begun to act in a proactive and constructive way that becomes mutually reinforcing?