Ireland lands bailout of up to 90bln euros

November 22, 2010 12:00 am

, BRUSSELS, Nov 22 – Ireland clinched a bumper bailout as pressure stretching from Tokyo to Toronto pushed Europe and the IMF to plough up to 90 billion euros into the eurozone\’s second emergency rescue this year.

"The government has made a request for financial assistance to the European Union and the European authorities have agreed," Irish Prime Minister Brian Cowen said late Sunday after a crisis cabinet meeting in Dublin.

Finance Minister Brian Lenihan said partners "have not determined a precise figure," but diplomats told AFP "the amount envisaged is between 80 and 90 billion euros" (110 and 123 billion dollars).

Confirmation of the numbers would come at the conclusion of negotiations in Dublin between the Irish government and experts from the European Commission, the European Central Bank and the International Monetary Fund.

The rescue plan was sealed amid emergency conference calls involving G7 partners in the United States, Japan and Canada, and followed market demands to plug a gaping hole in Ireland\’s banking system, after borrowing costs for Cowen\’s government soared.

In Washington, IMF managing director Dominique Strauss-Kahn said his organisation "stands ready to join" the effort with a multi-year loan.

Asian stock markets mostly rose on Monday on news of Ireland\’s bailout. Tokyo enjoyed a boost from the euro\’s rise in the wake of the Irish deal.

On currency markets, the euro surged past 1.37 dollars in Asian trade, buying 1.3769 dollars in the afternoon in Tokyo, up from 1.3673 dollars in New York late Friday.

Aimed at cleaning up Ireland\’s devastated banking sector, the bailout is "warranted" to protect Europe\’s wider economy, EU finance ministers said.

The ECB, which has been propping up Irish banking, said thejustification was "to safeguard financial stability in the European Union and in the euro area."

The latest rescue follows a 110-billion-euro EU-IMF package in early May for Greece, where public overspends and dodgy data reporting to Brussels had become endemic.

Struck in the hope that money markets would react positively at open early Monday, the deal came as Ireland finalised its own four-year deficit crisis plan.

Ireland will benefit from funds, or loan guarantees, assembled under a 750-billion-euro EU-IMF fund created hard on the heels of the Greek deal.

However, with Cowen\’s government holding only the narrowest of majorities ahead of a by-election this week, domestic consequences remain unpredictable.

Anger spilt onto the streets of Dublin following the announcement and one protester was injured after accidentally being struck by a ministerial car.

Meanwhile, Michael Noonan, finance spokesman for the Fine Gael party, said there would be targets set down by the IMF and by Europe that the government will have to meet.

"So on the fiscal area they have lost an enormous amount of control," he told RTE.

Dublin had already injected 50 billion euros into failed lenders, pushing its public deficit to 32 percent of output — more than 10 times the EU limit.

Dozens of international experts have spent the past four days poring over Ireland\’s books on the ground.

"The danger of contagion grows the longer this takes," German finance minister Wolfgang Schaeuble warned.

French Finance Minister Christine Lagarde said the EU and the IMF sent a "very strong message" to the money markets in the move designed to prevent the collapse of Irish banks.

Her statement in an interview with AFP was borne out when the euro soared past 1.37 dollars in Asian trading on Monday.

The euro bought 1.3755 dollars in Tokyo morning trade, up from 1.3673 dollars in New York late Friday.

The euro has faced heavy selling in recent weeks due to the alarming debt levels of eurozone nations including Ireland.

Aid will target banking, with the EU highlighting an urgent need for "deleveraging and restructuring."

The Irish government pointed to "guarantees, recapitalisation and asset segregation."

Britain and Sweden offered bilateral assistance and could yet be joined by other non-euro states, Brussels said.

However, Slovakian finance minister Ivan Miklos hinted at dissent over future write-downs, saying "banks should take part in the rescue package as well."

That echoed German Chancellor Angela Merkel\’s drive to lessen taxpayer risk under a permanent rescue fund to be set up from mid-2013.

However, it contradicted a statement made by Britain, France, Germany, Italy and Spain at a recent G20 summit in South Korea, which insisted that the private sector would not carry any risk under pre-2013 arrangements.

The aid is seen as necessary to prevent Ireland\’s financial black hole bringing down other weak euro economies such as Portugal and Spain, and infecting the wider international financial system.

In the past three years, Ireland\’s public finances have been ravaged by a triple whammy of costly banking support, a real estate meltdown and global recession.

Dublin aims to make 15 billion euros of budget savings by 2014.


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