Ireland under pressure over bailout
Ireland will face intense European pressure today to accept a massive financial bail-out – not just to rescue the Irish economy but to save the single currency itself.
Ahead of talks between the 16 eurozone nations, the Government was still insisting it needed no help from either the EU or the International Monetary Fund.
The nation’s sovereign debt, ministers emphasised, is fully covered until next summer.
But when Finance Minister Brian Lenihan sits down with his single currency counterparts in Brussels this afternoon, the message will be that “contagion” is threatening other struggling eurozone economies and must be contained.
German Chancellor Angela Merkel made clear yesterday that the future of the single currency could be at stake if Europe suffers a resurgence of a Greek-style crisis fuelled by speculators gambling on the euro’s plight.
A Dublin cabinet meeting this morning will determine what stand Mr Lenihan takes, but he will face warnings in Brussels that the Government cannot cling to economic sovereignty if it risks the single currency’s future.
The four-year plan designed to fix the economic crisis is due to be published next week – but that will not quell demands for decisive action now to avert more euro instability.
Greece and Portugal both fear that Irish euro “contagion” will infect their fragile economic recoveries.
The Portuguese finance minister will tell Mr Lenihan today that Dublin must recognise the Irish economic problem is also a problem for his country and for Greece, and potentially for the entire eurozone.
Fernando Teixeira dos Santos urged Dublin to do the right thing for the euro and accept a bail-out.
Luxembourg Prime Minister Jean-Claude Juncker, chairing tonight’s eurozone meeting, has promised that ministers are ready to act swiftly if Dublin gives the nod to assistance.
But Taoiseach Brian Cowen gave little sign last night of a willingness to accept help. He insisted the Government intended to sort out its own budgetary and fiscal problems – which include a deficit running at 32% of its national wealth.
That compares with a maximum deficit level permitted under the single currency of just 3%.
One of the options for Ireland is to take up what the European Commission called a “financial backstop” in the form of a €60bn European Financial Stability Mechanism bail-out fund.
However, guarantor member states would only be liable if Ireland defaulted on any emergency loan.
British Prime Minister David Cameron said yesterday that Ireland was a key trading partner and its stability was very much in the UK’s interests.
“If you look at the Irish economy, Ireland is an enormously important trading partner with Britain. It’s a fact that we actually export more to Ireland than we do to Brazil, Russia, India and China combined,” he told the Commons.
The issue is also likely to dominate discussions during tomorrow's routine meeting of all 27 EU finance ministers, even though it is not on the formal agenda.
Minister for European affairs Dick Roche today urged EU finance ministers not to “panic” and said there was no need for his country to trigger international support mechanisms.
He told BBC Radio 4’s Today programme: “There’s no application for IMF or EU funds and it’s not helpful to speculate.
“I would hope that after the meeting this afternoon there would be more logic introduced to this. There’s no reason why we should trigger an IMF or EU-type bail-out.”
He added: “There is a problem with liquidity in banks but I don’t think the appropriate response to that would be for European finance ministers to panic.”