The Republic of Ireland was set to make a formal request for
international aid to shore up its finances on Sunday.
Finance minister Brian Lenihan put no figure on how much
may be borrowed, but told RTE radio it would be “tens of billions” of
euros.
BBC business editor Robert Peston said the request to the
European Union and International Monetary Fund (IMF) would not be refused.
The government is finalising a four-year plan to cut its
budget deficit.
Details were set to be thrashed out at a cabinet meeting
on Sunday, and only after this budget is approved by the potential lenders,
could the bail-out go ahead.
Mr Lenihan said: “I have no doubt the plan will be
convincing.”
The country has been coming under pressure from European
neighbours to apply for the funding – which they hope will ease pressure on
other eurozone members facing mounting debts and deficits.
However turning to the EU and IMF for help is a
turnaround for the Irish government, which earlier this week denied such a
package was being negotiated or was necessary.
The Republic is currently spending about 19bn euros
(£16bn; $26bn) more than it receives in taxes and revenues, but its crisis-hit
banks also need a massive injection of back-up funds.
The Sunday Times speculated that the Republic’s bail-out
package would be worth up to 120bn euros.
This compares with the 110bn euros Greece is set to
receive over three years.
However, Mr Lenihan said the total would “not be
three figures”.
He added that the “bulk of the money” would be
“a contingency fund which stands behind the banking system” and said
that any money borrowed would be at far lower rates than the country could get
on the money markets.
The finance minister added that it would not be a
condition of the external assistance that it raised the country’s corporation
tax rate, which stands at 12.5% – much lower than the EU average.
The Sunday Telegraph reported that some of the biggest US
companies had warned the
Republic of the “damaging impact” if the corporation tax was raised.
Microsoft, Hewlett Packard, Merrill Lynch and Intel were
among those to warn of the risk to the country’s “ability to win and
retain investment”, the paper said.
While the UK is not part of the eurozone, its taxpayers
will end up footing some of the bill for the bail-outs.
For example, the UK contributes 12% to the European
Financial Stability Mechanism (EFSM) – one of the funds the Irish government
may draw on.
Also, the UK is committed to funding 4.5% of any aid from
the IMF.
And BBC business editor Robert Peston said the UK
chancellor George Osborne was also considering a direct loan to the Irish
government.
The Republic is among the UK’s largest trading partners
and tough times could means less demand for UK goods and services.
Two key areas will form the basis of the cabinet’s
discussions of the four-year plan, says BBC business correspondent Joe Lynam –
the country’s precarious fiscal situation which has pushed the budget deficit
to 32% of gross domestic product, and how best to prop up the country’s
enfeebled banking sector which has been frozen out of international markets and
all but nationalised.
The Sunday Telegraph also reported that advisers for the
Irish government had been talking to banks it felt may be in a position to buy
large stakes in either Anglo Irish Bank or Allied Irish Bank – in both of which
the government holds stakes.
On Friday, Allied Irish Banks said 13bn euros of deposits
had been withdrawn this year, mostly from businesses and institutions –
implying that the bank does not face a run by ordinary depositors.
Although the Irish government claims to be fully funded
until the middle of next year, it has provided a blanket guarantee to the Irish
banks, some of whom are now finding it impossible to borrow money in the
markets.
On Thursday, the Irish government admitted for the first
time that it may need outside help.
Previously the government had said it did not need any
financial support from the European Union and IMF.
Related Videos
