The Republic of Ireland is in
preliminary talks with EU officials for financial support, the BBC has learned.
It is now no longer a matter of whether
but when the Irish government formally approaches the European Financial
Stability Fund for a bailout, correspondents say.
The provisional estimate for EFSF loans
is believed to lie between $82bn and 110bn.
Dublin says there are no talks on an
application for emergency EU funding.
A spokesman for Ireland’s department of
finance said the country was funded until the middle of 2011, the
public-service RTE broadcaster reported.
RTE had earlier said talks had been held
on how a bail-out might happen in a theoretical worst-case scenario.
The European Commission would not
formally comment on the matter.
Eurozone officials told the Reuters news
agency on Friday that discussions were under way, with one saying that it was
“very likely” Ireland would receive financial assistance.
The head of the International Monetary
Fund, Dominique Strauss-Kahn, said on Saturday that it had not been asked for
aid.
Unlike Greece last May, Ireland doesn’t
need to ask the markets for money until next year. But bond traders are not
convinced it can cut its deficit by enough by then and have pushed the cost of
borrowing to unsustainable levels (8.3 per cent).
Dublin had hoped that by slashing
spending and raising taxes in the forthcoming budget on 7 December, it would
show resolve and in doing so drive down the cost of borrowing on the bond
markets. That hope is now dashed.
Now that talks have begun with Eurogroup
officials, Ireland has the embarrassment of pressing ahead with day-to-day
management of a country still officially Europe’s third richest – knowing that
it will have to join an exclusive but not illustrious group of nations needing
to go cap in hand to their fellow eurozone countries for a loan.
“So far I have not had a request, and I
think Ireland can manage well,” he told reporters at the Apec summit in
Yokohama.
The IMF and EU had to step in with a
110bn-euro bailout package for Greece in May, sparking a Europe-wide sovereign
debt crisis.
BBC business correspondent Joe Lynam
says any bailout would not be agreed this weekend, but might though come as
early as next month.
A meeting of the Eurogroup, composed of
the EU member states whose currency is the euro, is scheduled for 6 December.
The Economic and Financial Affairs
Council (Ecofin) – comprising the economics and finance ministers of eurozone
countries – will gather the following day.
Lastly, the full European Council is to
meet on 16 and 17 December.
By-election
Since 2008, Ireland has suffered the
worst property collapse of all developed economies, with house values falling
between 50% and 60%.
Our correspondent says the Irish
government has also all but nationalised the country’s banking system, which
had lent recklessly at an estimated cost of 40bn to 50bn euros.
Ireland has faced one of the deepest
recessions in the eurozone
The country has promised the EU it will
bring its underlying deficit down from 12 per cent of economic output to 3 per
cent by 2014. Its current deficit is an unprecedented 32 per cent of gross
domestic product, if the one-off cost of bad debts in the Irish banking system
is included.
The Irish government, which has a flimsy
majority in parliament, is set to publish another draconian budget on 7
December, which will make spending cuts or tax rises totalling 6bn euros, and
aims to bring the deficit down to between 9.5-9.75 per cent next year, he adds.
That parliamentary majority is likely to
be cut to only two on 25 November, when a by-election will be held that the
governing Fianna Fail party is likely to lose.
The government had left the Donegal
South West seat empty for 17 months but the Republic’s second-highest court
recently ruled that the delay was unreasonable. Three other by-elections are
also required.
Investors fear the budget cuts are
likely to worsen the country’s already deep recession, leading to further
losses to the government via falling tax revenues and higher benefit payments.
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