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22nd Oct 2021

EU-IMF troika heading to Dublin to oversee budget preparations

  • Irish finance minister Lenihan has battled cancer for the past year, winning respect for his personal resilience in Ireland (Photo: consilium.europa.eu)

Ireland's fiscal sovereignty was hanging by a thread late on Tuesday evening (16 November) as eurozone finance ministers announced that EU and IMF overseers were to head to Dublin to supervise preparations for a fresh round of cuts for the next four years to ensure that they are as deep as necessary.

Dublin appeared to stand up to massive pressure from the European Central Bank and other countries that use the euro, particularly Spain and Portugal, to sign up to a bail-out, with Taoiseach Brian Cowen announcing to the Dail, the country's parliament, that the debt-addled country will not apply for assistance.

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Eurogroup head Jean-Claude Juncker and European Commission economy chief Olli Rehn told reporters following a meeting of eurozone finance ministers that they were ready to step in to bail out Ireland if necessary, but only if the country chose to apply for the funds.

"We confirm that we will take determined and co-ordinated action to safeguard the financial stability of the euro area, if needed, and that we have the means available to do so," they said in a statement.

However, pressed to name a schedule and the scope of any bail-out that might be under discussion, Mr Rehn simply said it was "premature" to answer such questions.

Earlier in the afternoon, the Wall Street Journal reported that finance ministers were in fact looking at a dual package of between €45 and €50 billion to bail out Irish banks and a broader sum of €80 to €100 billion to shore up the country's public finances, quoting unnamed sources.

One contact close to the discussions told EUobserver they "could neither confirm nor deny" the report, while another said the numbers in the Wall Street Journal article "are not a figment of anyone's imagination."

In such a situation, reported the WSJ, the IMF would chip in about half the aid that the EU and the UK together would provide.

The non-eurozone UK is reportedly under pressure to contribute to any deal, given the heavy exposure of British banks in Ireland, particularly RBS, although Prime Minister David Cameron has recently voiced support for the idea of bilateral financial support for its one-time colony. Shares in UK financial institutions have slid over the past week as a result of the tumult.

The drafting of a new four-year austerity budget, which looks to ratchet up the level of cuts - bringing the total level up to €20.6 billion since the end of 2008, or 13 percent of GDP - has for all intents and purposes been removed from the province of the nation's elected representatives and passed over to a troika of officials who will head to the Irish capital on Thursday to take a magnifying glass to the document.

Mr Juncker said that the Irish government will "engage in a short and focussed consultation with the European Commission, the ECB and the IMF in order to determine the best way to provide any necessary support to address market risks, especially as regard the banking sector, in the context of the four year budgetary plan and the upcoming budget."

The four-year plan is scheduled to be presented early next week and next year's budget is expected to be unveiled on 7 December.

Mr Rehn said that talks between Ireland and the commission-ECB-IMF troika "that have been taking place since the weekend will now intensify and move to Dublin."

He also added that the "mission will be conducting technical tasks focussed on the restructuring of the banking sector and thus intensifying preparations for a [bail-out] programme in case such a programme is requested and deemed necessary by euro area states."

Klaus Regling, the head of the European Financial Stabilisation Facility, the €440 billion fund that could be called upon to provide a portion of any bail-out, said that they would be "ready to go within days and raise funds [from international investors] in five to eight working days."

Meanwhile in Ireland, opposition politicians began to call on Taoiseach Cowen to resign.

Enda Kenny, leader of the centre-right opposition party Fine Gael lamented that Ireland could become a fiscal protectorate of the troika.

"This is a democracy and people died on the street for it. It will not be closed down by incompetence. It will not become the laughing stock of Europe," he said.

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