x Abu Dhabi, UAEFriday 28 July 2017

Ireland holds cabinet meeting ahead of expected bailout

The government is expected to finalise a four-year plan designed to reduce the country's budget deficit.

The government of Ireland will hold a cabinet meeting today to finalise a four-year plan to reduce the budget deficit as a prelude to an expected bailout from Europe.

Officials from Ireland, the EU and the IMF have begun talks on a financial aid plan to help the country rescue its banks amid concerns about contagion to the rest of the euro zone.

Barclays Capital estimates the bailout plan could involve between €22 billion (Dh110.47bn) and €37bn to restructure and recapitalise Irish banks, plus about €60bn to cover the state's funding needs for three years.

Brian Cowen, the Irish prime minister, told Reuters the second day of talks on a possible aid package with European leaders were "going well". Mr Cowen has outlined a budget plan to save €15bn over four years.

"The talks … are going well in terms of being open and constructive," he told Reuters.

Mr Cowen said he was confident measures to save €6bn next year would pass when the parliament voted on the budget on December 7, despite the government's slim parliamentary majority.

Plans may include the European financial stability facility, the €440bn emergency loan programme created to help euro zone countries refinance their debts.

Banks in Ireland had borrowed €130bn from the European Central Bank as of the end of last month, although part of that was lent to foreign banks based in the country. Irish banks also borrowed nearly €35bn in liquidity assistance from their own central bank by the end of last month.

Allied Irish Banks, Ireland's second-biggest lender, illustrated the extent of the crisis by reporting a 17 per cent decline in deposits this year and tripling in its reliance on funding from central banks.

The government's four-year plan is expected to get the budget deficit back to the EU ceiling of 3 per cent of GDP by 2014, compared with the government's deficit estimate of 32 per cent for this year.

Standard & Poor's expects the country's GDP to shrink by a further 0.8 per cent by the end of the year, and unemployment to peak at 13.5 per cent.

Dublin has insisted it will not negotiate its 12.5 per cent corporation tax rate, the second-lowest in the EU.

 

* with agencies

 

farah.halime@thenational.ae