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31st Oct 2020

Barroso: EU ready to help Ireland

  • Barroso: 'We have all the necessary instruments in place now to support Ireland if necessary' (Photo: ec.europa.eu)

European Commission President Jose Manuel Barroso has said the EU is ready to come to Ireland's rescue if necessary, amid ongoing market turmoil surrounding eurozone peripheral states.

The head of the EU executive body made the comments to reporters in Seoul on Thursday (11 November), where G20 leaders are meeting to discuss global trade imbalances and currency values, two areas where China is deemed to be out of line by many.

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"What is important to know is that we have all the necessary instruments in place now to support Ireland if necessary," said Mr Barroso when asked on the subject. "We are monitoring the situation closely," he added. "We support the efforts of the Irish authorities [to rein in their budget deficit]."

EU leaders hastily agreed a €440 billion European Financial Stability Fund (EFSF) for struggling eurozone states earlier this year, backed up by a further €60 billion in commission support and €250 billion from the IMF. The deal followed a separate bail-out for Greece.

Attention is now focused on how the as-yet-untested EFSF will work, after Irish borrowing costs reached record euro-era levels on Wednesday.

A commission spokesman on Thursday confirmed that Dublin had not requested financial assistance, insisting that this was the first step towards activating the stability fund based in Luxembourg.

Meanwhile the cost of insuring sovereign debt using credit default swaps for Ireland, Spain and Portugal rose to new heights, with the value of the euro also falling against other major currencies.

"With three countries in the euro area now having virtually lost access to capital markets, the implications for the region as a whole could easily become systemic again," Royal Bank of Scotland analysts said in a report to investors.

The renewed turmoil forced the ECB to step up bond purchases last week, amid signs that Europe's fragile economy is starting to stagnate. New figures show Spain's economy neither grew nor contracted during the third quarter of this year.

G20

Ireland's woes will be an unwelcome distraction for top EU policymakers in South Korea for the G20 leaders' meeting this week (11-12 November).

In preliminary speeches, both Mr Barroso and European Council President Herman Van Rompuy signaled their desire to tackle global trade imbalances, amid doubts over China's willingness to agree to a US-proposed system of limits.

"I do not believe that mechanical, one-size-fits-all numerical targets are the answer to this challenge," said Mr Barroso. "But I think indicative guidelines could help to address large imbalances and trigger a more in-depth assessment of their nature."

The bloc's senior policymakers have taken a tougher stance on currency issues, repeating their long-held view last month that the Chinese yuan is undervalued and therefore hurting EU exporters.

"We rather want exchange rates that reflect the reality of the economic fundamentals and are market-determined," said Mr Van Rompuy in Seoul.

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