If financial markets believe that the Government will not have any problem rolling over its debt in future years, interest rates will be lower and it will be easier for the Government to service the debt.
Conversely, market concerns about debt sustainability will raise interest rates, making it more difficult for the Government to borrow in the markets.14 Hence, expectations are self-fulfilling, permitting both a good and a bad equilibrium. To facilitate a smooth exit from the programme, it is therefore important that financial market concerns about the future debt service burden of the Irish Sovereign are allayed.