Holdings by non-residents of Irish pound-denominated government paper also grew after the devaluation of 1986, reaching 16 per cent of GNP by the end of the decade. By this stage, international market conditions and the attitude of international investors to the Irish sovereign as well as to the prospects for the Irish pound were central influences on interest rates and borrowing conditions.
Soaring Irish pound interest rates in the early 1980s reflected each of these uncertainties. Irish pound interbank interest rates (three-months maturity) returned on average 2½ percentage points over corresponding German rates in the last ten years of the narrow bank ERM before the ERM crisis.