ANALYSIS:As Ireland gets set for its next four budgets, events in Greece and elsewhere take their toll

INTEREST RATES down. Unemployment up. Turmoil in markets. Madness in Athens. Confusion in Cannes. Farce in Rome. And today the Government will set out the size and composition of the next four budget adjustments.

Even by the standards of the never-ending two-year euro crisis, yesterday was exceptional. The acceleration in the pace of events in our Continent seems to be without end.

Start in Frankfurt. Mario Draghi took over as president of the European Central Bank on Tuesday. Yesterday, before he had warmed the president’s seat, he and his 22 colleagues cut interest rates. It was a bold and unexpected move. Although the bank has been proved wrong in its decision to raise rates twice earlier this year, yesterday’s decision makes some amends.

Just as importantly, it gives reassurance that the Italian will not try to be more German than the Germans themselves on keeping prices stable. There were (and still are) real concerns that a central banker from a country with an awful inflation record would feel compelled to be ultra-hawkish when setting interest rates. With inflation in the euro zone at 3 per cent – well above the just-below-2-per-cent target the bank is mandated to meet – cutting rates was brave.

And from what was said at his first press conference yesterday, Draghi won’t stop at that. He looks like giving those servicing debt an early Christmas present when he delivers another cut in December. Given Ireland’s weak economy and its lowest-in-Europe inflation, super-low interest rates are just what the doctor ordered. Bravo, Mario.

Yesterday also saw the publication of October’s unemployment rate and welfare claimant count. Both were up on September, but only by a smidgen. What is remarkable about the jobless rate – apart from the human misery it points to – is how steady it has been since September of last year. Over the past 13 months, it has trended neither up nor down. That it is not rising is a positive, given how much upheaval has been experienced over that period. But it remains one of the highest rates in the developed world and its failure to fall means that the years-long process of returning to full employment has not even started.

Minister of Finance Michael Noonan would no doubt chose to stress the more positive interpretation of yesterday’s jobless figures. Yesterday, in a speech to the Institution of International and European Affairs, he urged everyone to be cheerier. If we were all more confident, the economy could be “in a very good place very quickly”, he said.

He overstates his case – a lot. While confidence is important, all the positivity in the world will not shrink households’ huge debt, lessen the need for painful budgetary adjustments or fix broken banks.

Despite his upbeat message, Noonan let it be known that he would cut the Government’s forecast for economic growth next year. The downgrading of the official forecast was, he said, a result of a gloomier international outlook.

New official forecasts, and much else besides, are to be published this afternoon in the Department of Finance’s pre-budget report. It is the first piece in the budgetary jigsaw, and in many ways it will be the most important. It will definitively answer the question of how big next year’s adjustment is to be (anything outside the €3.6-€4 billion range would be a surprise) and signal the size of adjustments in each subsequent year to 2015.

It will also answer the question that has long divided the Coalition partners – how much of the adjustments should be accounted for by spending cuts and how much by new taxes?

A well-argued report, based on realistic targets and informed by the comprehensive spending review conducted over the summer will boost the Government’s credibility and help in the State’s long haul back to creditworthiness.

If Noonan and his colleagues have built some credibility since taking office, Greece’s George Papandreou and his ministers long ago lost theirs. Papandreou’s personal decision to call a referendum on Sunday night turned whatever sympathy his counterparts had for him into contempt.

If his gross recklessness ends in his departure and the coming to power of a national unity government, it will be the best of all possible outcomes for that country as it faces a full-scale national emergency, although the prospect of that receded last night after his U-turn on holding a plebiscite.

But no matter what happens in domestic Greek politics, Papandreou’s hare-brained stunt has edged the euro still closer to break-up.

The response of other EU leaders to the referendum threat was, for the first time, to contemplate publicly a member country departing the single currency bloc. Though understandable given the intensity of frustration with the Greek administration, threatening to boot a country out of the euro was a huge mistake.

EU leaders have repeatedly and steadfastly stated that leaving was unthinkable and legally impossible. They should know by now that rowing back on solemn commitments ends up weakening them collectively. They may well rue their overreaction to the Greek prime minister’s provocation.

But if the eyes of the world have been on Papandreou’s moment of madness, the biggest problem is Greece’s nearest euro neighbour, Italy. Following one day of calm after last week’s latest plan to save the euro was unveiled in Brussels, Italian government bond yields soared. This week they have been well above previous euro-era peaks, reached when the euro crisis entered end-game territory in July.

The Italian state needs to raise €300 billion between now and the end of next year. It is touch and go as to whether it will be able to do that.

Despite this frightening risk, the Italian government continues to fiddle with a reform package that, if announced and swiftly implemented, could demonstrate an intent and capacity to avert disaster.

The most direct and immediate consequence of all this turmoil for Ireland was the decision of the EU’s bailout fund – the European Financial Stabilisation Facility – to postpone its bond auction on Wednesday. The money raised was to be used to fund Ireland’s next tranche of bailout cash.

The retreat from the market is a very worrying development, and not just for Ireland. The EFSF is built on shaky foundations because its creditworthiness is so closely linked to that of France.

As concerns about Frances fiscal capacity have grown, so too have concerns about the EFSF. Since the euro crisis moved into end-game in July, EFSF five-year bond yields have gone from 50 basis points above those of Germany to more than 150 basis points.

If it comes to it, who will bail out the bailout fund?

Only the ECB stands between the euro and oblivion if the EFSF ends up being unable to raise cheap cash.

Mario Draghi is the third ECB president. Increasingly, it appears as if his actions will determine whether he will be its last.