European finance ministers have agreed to bankroll a massive bailout for Ireland, the eurozone’s second emergency bailout this year.
The international rescue sees non-euro Britain and Sweden join Ireland’s eurozone partners and the International Monetary Fund in a package worth ‘‘less than 100 billion euros ($138.5 billion),’’ Belgian Finance Minister Didier Reynders said.
Reports this morning suggested the bailout would be worth between 80 and 90 billion euros ($111 and $124 billion).
Asked for help ... Ireland's Prime Minister Brian CowenCredit: Reuters
Portugal still in the firing line
The aid is seen as necessary to prevent a financial black hole caused by the collapse of Ireland’s banking sector from bringing down other weak euro economies such as Portugal and Spain, and from infecting the wider international financial system.
The breakthrough deal came after Ireland drew up its demands for the bailout package after four days of pressure-cooker talks in Dublin between the government of Prime Minister Brian Cowen and experts from EU institutions and the IMF.
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.
Eurozone and EU finance ministers agreed in principle during an evening conference call to use a 750 billion euros ($1.03 trillion) war chest set up in May after Finance Minister Brian Lenihan recommended to cabinet colleagues that they lodge a request for financial aid.
The European Financial Stability Facility was set up after a 110 billion euro EU-IMF spring bailout of Greece, where public overspends and dodgy data reporting to Brussels had become endemic.
A diplomat told AFP that ministers looked ‘‘favourably’’ on the cry for assistance, although no figures were immediately available from any of the participants in the talks.
Ministers from the G7 group of rich nations, adding the US, Japan and Canada to euro giants France, Germany and Italy, plus Britain, were also staging discussions on the bailout, in a clear sign of global concern.
Reynders said details of loan guarantees, expected to include strict repayment conditions and economic restructuring demands, would be worked out over coming days by the European Commission, the IMF and the European Central Bank in their talks with the Irish government.
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.
German Finance Minister Wolfgang Schaeuble said that it was important to resolve the issue soon so that there would be no a knock-on effect elsewhere.
‘‘This was why in recent days many people have pressed Ireland to address its problems more quickly and not to delay, because the danger of contagion grows the longer this takes,’’ Schaeuble said.
Ireland’s domestic four-year plan, to be published within days, aims to make 15 billion euros of budget savings by 2014.
Dublin has pumped some 50 billion euros into the country’s stricken banks, pushing its public deficit to 32 per cent of output -- more than 10 times the EU limit.
AFP, Reuters