by editor | 17th November 2010 9:10 am
Prospects for an emergency package of help moved a step closer after a day of tense negotiations
Jill Treanor and Larry Elliott
Financial hit squads from the International Monetary Fund, the European Central Bank and the EU will be parachuted into Dublin within days to finalise details of a multibillion-euro bailout for the stricken Irish economy, it was revealed last night.
Prospects for an emergency package of help – part bankrolled by Britain – moved a step closer after a day of tense negotiations between finance ministers from the 16-nation eurozone.
With Ireland still holding out against a bailout for now, the experts will be sent in a fresh attempt to calm markets after yesterday’s volatile trading ahead of the Brussels meeting. George Osborne was travelling to Brussels last night for a meeting of the wider EU group amid mounting speculation that the UK would be expected to contribute at least £7bn to any Irish bailout. There were also suggestions that Britain would extend bilateral loans to stabilise Ireland’s banking system.
After the Brussels talks – which started one and a quarter hours late because Ireland’s finance minister, Brian Lenihan, was stuck in traffic – Dutch finance minister Jan Kees de Jager revealed the decision to assemble the assessment team.
“We will follow developments and then we have a look … and if it is necessary, the mechanism is ready. If there is an application from any country, the mechanism is ready,” de Jager said.
Olli Rehn, the EU official responsible for economic and monetary affairs, said work on support for Ireland would set up “with an accent” on its banks. But without agreement from the Irish authorities, the international community will be unable to act to prop up the country’s banking system, which has already been bailed out once after ill-timed and exuberant lending to the property sector.
During a day of high drama, Irish prime minister Brian Cowen told MPs in Dublin the country did not need financial assistance – estimated at as much as €100bn – to support the banks. In Brussels, Lenihan said Ireland was “fully funded until the middle of next year”, adding that the markets are “not being good to Ireland”.
The country’s borrowing costs shot up to 9% last week amid fears that the extent of the country’s banking crisis would make it impossible for Ireland to keep paying back its debt.
Its problems have prompted fears of contagion spreading to countries such as Spain and Portugal, and potentially threatening the entire eurozone.
EU president Herman van Rompuy spelt out fears, saying the eurozone was in “survival crisis”. The IMF, ECB and EU team will conduct a “short, focused consultation on the best way to avoid market risks” and cut Irish borrowing costs.
Bank of England governor Mervyn King earlier acknowledged that the exposure of Britain’s banks was by no means trivial. A spokesman for the Treasury said: “There has been no formal request for assistance from the Irish government. We are not going to engage in speculation on what may or may not happen in Ireland – or in any other country.”
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