Ireland lands '80-90 billion euro' bailout

13:24 | 22/11/2010
Europe and the IMF agreed Sunday to bankroll a massive bailout for debt-ravaged Ireland, estimated at between 80-90 billion euros, the second emergency rescue in the eurozone this year.

"I can confirm that the government has made a request for financial assistance to the European Union and the European authorities have agreed to our request," Irish Prime Minister Brian Cowen said after an emergency cabinet meeting in Dublin.

His 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 ).

Confirmation of the bailout amount 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.

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 had to pump in liquidity, also said in a statement "providing assistance to Ireland is warranted 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.

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.

Michael Noonan, finance spokesman for the main 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.

After conference calls also involving G7 partners in the United States, Japan and Canada, IMF managing director Dominique Strauss-Kahn said his organisation "stands ready to join" the effort for Ireland with a multi-year loan.

The rescue plan emerged amid enormous market pressure to plug a gaping hole in Ireland's banking system, with borrowing costs for Cowen's government soaring.

Dublin had already pumped 50 billion euros into failed lenders, pushing its public deficit to 32 per cent 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 had warned.

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 costly banking sector rescues, a property market meltdown and the global recession.

The deal, which was struck in the hope that money markets would react positively after the weekend, came as Ireland finalised its own four-year deficit crisis plan.

Ireland's plan, to be published within days, aims to make 15 billion euros of budget savings by 2014.


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