Ahearne warns of Lisbon's market consequences

The consequences of a "no" vote in the Lisbon referendum would be "quite disastrous" for the Republic's financial standing in international markets, Government adviser Dr Alan Ahearne warned today.

Addressing a gathering in Dublin of economists recommending a "yes" vote, Dr Ahearne said the markets are "fairly confident" that Irish voters will vote in favour of the Treaty on October 2nd.

The opposite result would, therefore, automatically damage sentiment, leading to higher borrowing costs for the State and for banks, he told the Economists for Europe seminar.

This would be "particularly tragic" in light of the reductions in borrowing costs seen very recently, he added, noting that the difference between the cost of borrowing for the Irish and German States was now approaching levels seen before last year's collapse of Lehman Brothers. It would be "quite disastrous" to have this gap widen again, Dr Ahearne said.

His views on the need to approve the Treaty were echoed in a survey of 66 academic economists carried out by economic consultants, Indecon, which concluded that a "yes" vote" would best for the economy. Some 90.8 per cent of the respondents, who included economists from Indecon and the Economic and Social Research Institute as well as various universities, agreed that Ireland's "overall economic interests are likely to be best secured" by voting yes.

Two-thirds of those surveyed said a "yes" was likely to facilitate the attraction of foreign direct investment, while 82.1 per cent judged a "yes" was likely to help develop confidence in the economy.

Slightly more than half of the economists agreed with Dr Ahearne's assessment on borrowing costs, finding that a "yes" would help reduce the cost of State borrowing. Alan Gray, managing director of Indecon, told the seminar a "no" vote would give rise to great uncertainty about the Irish economy, thus threatening foreign direct investment.

"Uncertainty when an economy is vulnerable is a completely different thing to uncertainty when everyone thinks we're better than sliced bread," said Mr Gray.