1st Oct 2020

Ireland denies latest bailout reports

  • Shopping in Dublin - the country is still the third richest in the EU in GDP/capita terms (Photo: UggBoyUggGirl)

A roll-call of Irish government ministers over the weekend denied reports that the country has begun talks on an EU-IMF bailout of up to €80 billion.

"We have not, contrary to much speculation, applied to join any facility, or avail of any facility," finance minister Brian Lenihan told Irish radio on Friday (12 November) after leading financial newswire Reuters first reported that clandestine bailout discussions are already under way.

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Mr Lenihan was joined by the minister for tourism, Mary Hanafin, the minister for justice, Dermot Ahern, and the minister for trade and business, Batt O'Keeffe, on Saturday and Sunday.

"It is fiction because what we want to do is get on with the business of bringing forward the four-year plan," Mr Ahern said on the RTE TV station's The Week in Politics show on Sunday evening. "There is nothing going on at the direction of government in relation to this. I spoke to the Taoiseach this morning. I spoke with the minister for finance and absolutely nothing is taking place in respect of this."

The government denials were bolstered by statements from Jean-Claude Juncker, the Luxembourgish chief of the eurogroup, the club of 16 countries which use the EU's single currency, and the IMF, both of which would have to be notified in the event of an Irish request.

"So far I haven't received any kind of request ... If at one point in time, tomorrow, in two months or two years, the Irish want support from the IMF, we will be ready," the international fund's chief, Dominique Strauss-Kahn, said from Japan on Saturday.

The Reuters report continued to gain credibility from a number of other leading media, however.

The BBC on Sunday said "it is no longer a matter of whether but when" the Irish government applies for help, citing anonymous sources. The Financial Times Deutschland, the Wall Street Journal and the International Herald Tribune said that preliminary talks between Ireland and its international counterparts are already under way.

The debate in Ireland has seen some opposition figures invoke the country's bitter struggle for independence from the UK as a reason not to reach out for help. The appeal to loss of sovereignty is a sign of the lasting political damage that the ruling centre-right Fianna Fail party stands to suffer in the event of a bailout.

"We fought hard for our independence, and we should not hand it away," Labour leader Eamon Gilmore told the Irish Times on Sunday. "I think it is important that we, as a country, retain our economic independence and sovereignty."

The realities of living under an EU-IMF rescue are currently on show in Greece, where EU, European Central Bank and IMF officials are due in Athens on Monday to oversee the publication of the country's next budget on Thursday.

Reaction to the weekend's statements by bond traders when markets open on Monday morning could be crucial in determining the way forward for Dublin, analysts say. If Ireland's cost of borrowing rises further, the government may be forced to reach out for help to staunch the financial bloodflow.

EU officials have meanwhile spent the weekend preparing for pre-scheduled meetings of eurozone and EU finance ministers on Tuesday and Wednesday, respectively, which are to shed more light on the situation.

Barclays Capital has estimated the cost of the Irish bailout at €80 billion to €85 billion. The money would come either from the European Commission's own €60 billion "community facility," which involves the UK, or from the joint EU-IMF €750 billion mechanism, which has no UK participation. An earlier EU-IMF Greek bailout of €110 billion is based on a third facility.

Ireland is the EU's third richest country in GDP per capita terms after Luxembourg and the Netherlands.

But it is struggling to bear the cost of a €50-billion-and-rising rescue of some of its largest banks, including the Anglo Irish Bank, and has a runaway budget deficit of 32 percent of GDP. The government has underlined that it can make all its debt repayments until May 2011 and that it has €25 billion in reserve. Further austerity measures are to be put forward in a budget on 7 December.

The Irish Independent newspaper on Monday morning said the EU bailout might involve the Irish banking sector rather than the state itself. "There is no question about Irish sovereign debt - the question remains about the funding of the banks. The banks are having trouble getting money," an Irish official told the publication on condition of anonymity.

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