Irish troubles a concern for euro stability

November 15, 2010
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, BRUSSELS, Nov 15 – Ireland\’s fiscal problems are a concern for the financial stability of the euro area as a whole but there are no talks of a bailout for Dublin, the European Commission said Monday.

"Yes, we are in close contact with the Irish authorities. Yes, there are concerns in the euro area about the financial stability of the euro area as a whole," said Amadeu Altafaj Tardio, a European Commission spokesman.

"But to say that there are strong pressures to push Ireland to any kind of (bailout) scheme of this kind, I think yes, this is an exaggeration," he told a news briefing.

The spokesman was responding to persistent rumours that European officials are pressuring Ireland to accept financial aid in order to calm the markets.

The situation in Ireland is "serious" and is causing "tensions" in the sovereign bond market, but the European Union is confident that Dublin will fulfill its deficit reduction targets, he said.

"The commission is in close contact with the Irish authorities and members of the Eurogroup," the spoksman said. "Financial backstops are ready to provide financial assistance if these instruments are requested and necessary."

But Ireland, he said several times, has "not made any request for financial assistance."

Ireland is heading for a public deficit of more than 30 percent of output this year, 10 times the EU limit. On debt markets, the interest rate which Dublin would have to pay to borrow money has shot up to about 9.0 percent.

The Commission spokesman said Ireland had "a strong track record when it comes to fiscal adjustment" and that its public finance needs were "fully covered until summer 2011."

When the cost of borrowing for Greece reached similar heights earlier this year, Athens, which had long-running structural problems, was brought to the verge of insolvency.

The Greek crisis sparked concerns about the stability of the eurozone, prompting European leaders to rescue Athens with a 110-billion-euro bailout in May and to set up a financial safety net for any other troubled economies.

The problem in Ireland is mainly the result of the cost to the Irish state of rescuing its banking system which had become grossly over-exposed to property markets.

Finance ministers of the 16 euro nations are due to meet in Brussels on Tuesday for long-scheduled talks that are expected to focus heavily on the situation in Ireland.

Asked to comment on concerns also about Portugal, Altafaj Tardio said "EU states are taking all necessary measures" to preserve economic recovery."

"We have the instruments to ensure that safety," he added. "It\’s better to be safe than sorry."

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