business‎ > ‎

Ireland confirms it will ask for a bailout

posted 21 Nov 2010, 09:32 by Sam Mbale   [ updated 21 Nov 2010, 09:41 ]

Irish Finance Minister Brian Lenihan confirms he will recommend to the Irish cabinet that the government should ask for bailout from international lenders.

DUBLIN, IRELAND (NOVEMBER 21, 2010) RTE - Ireland will seek a bailout from international lenders, Finance Minister Brian Lenihan said on Sunday (November 21), ending weeks of speculation that it would need aid to prop up its banks and help it secure cheaper state funding.

"I will be recommending to the government that we should apply for a programme and open formal negotiations," Lenihan told public broadcaster RTE.

The Minister for Finance confirmed that Ireland will be applying for a financial rescue package from the EU, the International Monetary Fund and the European Central Bank.

"I believe it is important that this state continues to fund itself in a stable way, that economic continuity is preserved, that there is no danger to be borrowing which the state requires to make in its own interests and also and above all the issue that has been highlighted this week, that our banking sector is stabilised. So for all these reasons I will be recommending to the government that we should be applying to a programme and open formal negotiations," Lenihan said.

Speaking on RTE's This Week, Brian Lenihan said he would propose the application to Sunday afternoon's meeting of the Cabinet.

Lenihan confirmed that discussions with the agencies had concluded on Saturday (November 20) evening.

The amount Ireland plans to apply for would not be a "three figure sum", Lenihan added, knocking down a report on Sunday that suggested Ireland would need as much as 120 billion euros.

Sources have told Reuters Ireland may need 45-90 billion euros ($63-$126 billion), depending on whether it needs help only for its banks or to cover general government spending too.

Lenihan said a plan to restructure Ireland's banks was likely to be a main feature.

International Monetary Fund and European Commission officials have been in Dublin since Thursday to discuss financial aid to help Ireland cope with its banks, whose huge liabilities have sent Irish borrowing costs soaring.

Euro zone ministers will discuss Ireland's application for European Union financial help at a conference call on Sunday at 1700 GMT, but no concrete amounts would be discussed yet, a euro zone source told Reuters.

The main concern for EU policymakers is Ireland's problems spreading to other euro zone members with large budget deficits like Spain and Portugal, threatening a systemic crisis.

Irish banks, brought to the brink of collapse by exposure to a property and construction sector that slumped after the global financial crisis, have grown dependent on ECB funds and suffered an exodus of deposits over the past six months.

Lenihan dismissed pressure on Dublin from other euro zone countries to raise low business taxes that have attracted many multinational companies to Ireland, saying changes to corporation tax were off the agenda and would hamper growth.

As well as a bank plan, the government will unveil details next week of a four-year austerity plan to save 15 billion euros, which Lenihan said would help to restore some confidence.