x Abu Dhabi, UAESunday 23 July 2017

Ireland receives €90 billion bailout

Anger spills onto the streets of Dublin at the news, which follows intense pressure on the Irish government to request the eurozone's second emergency rescue this year.

Ireland has clinched a bumper bailout as pressure stretching from Tokyo to Toronto pushed Europe and the IMF to plough up to 90 billion euros into the eurozone’s second emergency rescue this year.

“The government has made a request for financial assistance to the European Union and the European authorities have agreed,” Irish Prime Minister Brian Cowen said late yesterday after a crisis cabinet meeting in Dublin.

Finance Minister Brian Lenihan said partners “have not determined a precise figure,” but diplomats said “the amount envisaged is between 80 and 90 billion euros” (US$110 and US$123 billion).

Confirmation of the numbers would come at the conclusion of negotiations in Dublin between the Irish government and experts from the European Commission, the European Central Bank and the International Monetary Fund.

The rescue plan was sealed amid emergency conference calls involving G7 partners in the United States, Japan and Canada, and followed market demands to plug a gaping hole in Ireland’s banking system, after borrowing costs for Mr Cowen’s government soared.

In Washington, IMF managing director Dominique Strauss-Kahn said his organisation “stands ready to join” the effort with a multi-year loan.

Aimed at cleaning up Ireland’s devastated banking sector, the bailout is “warranted” to protect Europe’s wider economy, EU finance ministers said.

The ECB, which has been propping up Irish banking, said the justification was “to safeguard financial stability in the European Union and in the euro area.”

The latest rescue follows a 110-billion-euro EU-IMF package in early May for Greece, where public overspends and dodgy data reporting to Brussels had become endemic.

Struck in the hope that money markets would react positively at open early Monday, the deal came as Ireland finalised its own four-year deficit crisis plan.

Ireland will benefit from funds, or loan guarantees, assembled under a 750-billion-euro EU-IMF fund created hard on the heels of the Greek deal.

However, with Mr Cowen’s government holding only the narrowest of majorities ahead of a by-election this week, domestic consequences remain unpredictable.

Anger spilt onto the streets of Dublin following the announcement and one protester was injured after accidentally being struck by a ministerial car.

Meanwhile, Michael Noonan, finance spokesman for the Fine Gael party, said there would be targets set down by the IMF and by Europe that the government will have to meet. “So on the fiscal area they have lost an enormous amount of control,” he told RTE.

Dublin had already injected 50 billion euros into failed lenders, pushing its public deficit to 32 per cent of output - more than 10 times the EU limit.

Dozens of international experts have spent the past four days poring over Ireland’s books on the ground.

“The danger of contagion grows the longer this takes,” German finance minister Wolfgang Schaeuble warned.

French Finance Minister Christine Lagarde said the EU and the IMF sent a “very strong message” to the money markets in the move designed to prevent the collapse of Irish banks. Her statement in an interview was borne out when the euro soared past 1.37 dollars in Asian trading today.

Portugal, seen as the eurozone economy most at risk after Ireland, has hailed the bailout, saying it “calms fears, reduces incertitude and boosts market confidence.” Portugal’s Finance Minister Fernando Teixeira dos Santos said in a statement that the package was “without doubt a positive fact for the stability of the eurozone.”

Mr dos Santos did not mention the possibility that Portugal might also request external aid to avoid the risk of bankruptcy. On the contrary, he emphasised the differences between his country and Ireland, recalling that Portugal’s banking system was “well regulated and supervised” and “well capitalised.”

He stressed the government’s “clear and regulated” strategy to put in place “budgetary consolidation and structural reforms aimed at strengthening its competitiveness and potential growth.”