Mar 13 - Ireland's economy has contracted by a shock 2.3 percent in the fourth quarter as imports surged and consumer spending fell. The euro zone country had been gaining traction since the completion of an EU/IMF bailout last year. Ciara Sutton reports
Back in business - Ireland makes a triumphant return to the regular bond markets. Selling a billion euros of 10-year paper, in the country's first proper auction since its suspension over three years ago when it needed an EU/IMF bailout. Craig Erlam is from Alpari. (SOUNDBITE) (English) MARKET ANALYST AT ALPARI, CRAIG ERLAM, SAYING: "I don't think people really expected to respond the way it did or quite as quickly as it did. I think we've really got to give Ireland a lot of credit for the fact it's back in the bond market and rasing its own capital. I think another thing it really reflects is peoples search for a yield. What we've seen a lot with the periphery euro zone bonds is there's been a lot more interest this year in the likes of Spanish, Italian bonds." 10-year yields fell to a record low of 3.1 percent this week, compared with over 15 percent three years ago. And the auction received nearly three times more bids than it needed. Ireland has been raising debt periodically for over two years, and successfully exited its three-year rescue programme in December. But its not a done deal - bond sale relief was quickly replaced by worries over GDP. The country's economy contracted by 2.3 percent in the fourth quarter. The shock new data was blamed on a surge in imports and falling consumer spending. Phil Tyson is from ICAP. (SOUNDBITE) (English) HEAD OF STRATEGY FOR INTEREST RATE PRODUCTS AT ICAP, PHIL TYSON, SAYING: "Clearly this is a timely reminder that while a positive environment continues for these peripheral countries at the moment, as far as the bond performance is concerned, they've got a long hard road ahead." The news took economists by surprise - a Reuters poll had expected growth of 0.4 percent. Ireland's role as poster boy for the recovery could now be under threat - Portugal and Greece will be watching what happens next very carefully.