Europe set to approve bailout for Ireland

Europe set to approve bailout for Ireland
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First Published: Sun, Nov 28 2010. 10 46 AM IST
Updated: Sun, Nov 28 2010. 10 45 AM IST
Dublin: European ministers are set to sign off an €85 billion ($113 billion) emergency loan package for Ireland on Sunday that they hope will calm markets and prevent contagion to other parts of the euro currency bloc.
The Belgian presidency of the European Union said finance ministers from its 27 member states would meet in Brussels on Sunday to discuss Ireland, which is poised to become the second euro zone country after Greece to be bailed out.
A meeting of the so-called Eurogroup forum of euro zone finance ministers is expected to start at roughly 1:00pm (1200 GMT) and be followed by a meeting of ministers from the broader EU to sign off on the rescue.
Negotiators from the Irish government, the EU and the IMF met on Saturday at a Dublin luxury hotel to finalise the deal as thousands marched through the Irish capital to protest against a bailout that they fear will cede hard-won Irish sovereignty.
Ireland needs the funds to stem mounting losses at its battered banks, whose reckless lending during the “Celtic Tiger” boom years turned bad when a property bubble burst. Due to repeated bank bailouts, the country’s budget deficit is set to swell to one third of its economic output this year.
After the Irish rescue, investors could turn their attention to other high-deficit countries such as Portugal or Spain, testing Europe’s readiness to put up more taxpayer money to secure the future of its 12-year old single currency project.
Irish opposition parties that are expected to take control of the government in the coming months warned on Saturday, as the talks were being held, that a deal would be unacceptable if the interest rate on loans from the EU and IMF was too high.
Irish media reports have said the package could cost Ireland as much as 6.7 percent a year, although the government denied the cost would be that high.
“If true, it would be an appalling capitulation by the Irish government,” Labour Party leader Eamon Gilmore told a party conference. “And it would be a betrayal of the founding principles of the European Union.”
The government’s communications minister Eamon Ryan told a radio talk show that the reported figure was “inaccurate” and the final rate would be lower.
Fine Gael, the main opposition party, has said it would consider any rate above 6 percent excessive.
Fine Gael and Labour are expected to rout unpopular prime minister Brian Cowen’s Fianna Fail party in an election that is likely to take place within months. They have said they would be bound by any deal but may try to renegotiate details.
European officials have been at pains to play down the links between Ireland and Portugal, widely seen as the next euro zone “domino”.
Because of its close economic links with its much larger neighbour Spain, they fear a market assault on Portugal could set off a chain reaction engulfing the euro zone’s fourth largest economy. This would stretch the capacity of the 750 billion euro aid facility that the EU and IMF set up after Greece was pushed to the brink.
French President Nicolas Sarkozy held telephone calls with the leaders of Germany, Italy, Spain and Portugal at the weekend, his office said in a statement, underscoring the seriousness of a crisis that some experts believe could threaten the future of the euro zone.
Resistance to further bailouts runs particularly high in Europe’s largest economy, Germany, where Chancellor Angela Merkel has been accused of deepening the euro crisis by insisting on a new rescue mechanism that would make private bond holders shoulder part of the costs of future bailouts.
Berlin denied a magazine report on Saturday that it could agree to the issuing of joint euro zone bonds to help ease the debt crisis, an idea long pushed by Juncker.
A survey by polling group Emnid for Focus magazine showed Germans evenly divided on providing financial aid for countries such as Greece and Ireland, with 48 percent in favour of assistance and 47 percent against.
The Irish opposition parties Labour and Fine Gael want bond investors who lent money to Irish banks to take on a bigger share of their country’s bailout burden, rather than foisting it all on Irish taxpayers.
The downside of the plan is that it risks damaging confidence in other European banks and spreading the crisis.
Shares in European banks that hold Irish bank debt tumbled on Friday, the euro fell to a two-month low against the dollar and the borrowing costs of peripheral euro zone countries such as Ireland, Portugal and Spain hovered near record highs.
“NOT FOR SALE”
The Irish public has stoically borne two years of recession, a relentless surge in unemployment and a programme of tax rises and spending cuts, but people say they are furious over the new measures and the decision to seek aid.
Saturday’s demonstration was peaceful but boisterous, with thousands braving overnight snow to come by bus to the capital, some bringing their children.
It was the biggest protest since at least early 2009. Police put turnout at 50,000. Unions said it was three times as big.
Marchers assembled at Dublin’s General Post Office building, headquarters of a nationalist uprising against British rule in 1916. The prospect of handing sovereignty to Brussels has hit a nerve in a country where political discourse is still defined by the struggle for independence from Britain.
“We are trying to reclaim our sovereignty before it’s lost and before the IMF sell our natural resources and assets to the highest bidder,” said Feilim Wakely, from County Louth, north of the capital, holding a sign that read “EIRE NOT FOR SALE”.
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First Published: Sun, Nov 28 2010. 10 46 AM IST
More Topics: Europe | EU | Debt | Ireland | Economy |