2019
01/13

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‘Urgent’ Irish debt rescue launched

Europe and the International Monetary Fund announced Tuesday the launch of an urgent mission to Dublin to finalise emergency support for Ireland’s devastated banking sector.

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The arrival of experts from the European Commission, the European Central Bank and the IMF represents a further blow to Irish hopes it can ride out its debt crisis alone, although Dublin has yet to accept money.

It underlines fears among euro partners for the broader stability of the soon-to-be 17-nation currency area, after a bottomless banking bailout pushed Ireland’s public deficit beyond 30 percent of output this year.

As late as Monday evening, when fog-bound Irish Finance Minister Brian Lenihan arrived two hours late for crunch Brussels talks, following days of pressure driven by the ECB, his Prime Minister Brian Cowen was insisting there was no request for emergency funding.

Decision imminent as politics boils

But little over three hours later – a blink of an eye in Brussels time – Lenihan admitted that the final decision on whether to call in the cavalry was imminent.

“The government did not commit to enter a facility,” Lenihan said, “but there have been serious disturbances” on markets.

“I’m not going to impose timelines, but this is urgent.”

The heat is also on after Northern Ireland Sinn Fein leader Gerry Adams announced his resignation from British politics to seek office in the Irish parliament amid demands for a snap general election over the government’s handling of the crisis.

EU economic affairs commissioner Olli Rehn said plans in gestation for days would have “an accent on restructuring Ireland’s banking sector”.

Dublin had “committed” to explore shelter, he said, after tension on the bond market that reflected the mounting market uncertainty over the country’s financial prospects.

“We will act in a determined and coordinated way if necessary to ensure the stability of the eurozone,” said Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro finance ministers who must validate an application for support from partner states.

The Irish government would have to decide on financial aid, with inevitable strings attached, within “days,” said Juncker.

Ireland won’t be ‘enslaved’

Cowen had insisted to lawmakers in Dublin’s Dail that the unfolding discussions were about seeing how “irrational” markets could be “taken out of the equation”.

Ireland should not become “enslaved” to ruthless traders, he argued.

In Washington, the IMF said a “short and focused consultation” would have as its goal “to determine the best way to provide any necessary support to address market risks.”

US Treasury Secretary Timothy Geithner has said Europe would be well advised to act “very, very quickly.”

Europe was anxious to show it had learned the lessons of a 110-billion-euro joint EU-IMF bailout of Greece — Athens spent months pressing Brussels for help before getting it in spring, but that delay pushed up the cost for core contributor Germany.

This time, it was the money-holders who appeared to be pressing Ireland to accept their aid — and experts say Dublin could need about 70 billion euros.

French Economy Minister Christine Lagarde spelled out that the “consultations”, held since Sunday would “intensify from Thursday morning in Dublin,” when the international mission starts work on the ground.

With Portugal also admitting it was at “high” risk, EU president Herman Van Rompuy warned that the very future of the full 27-state bloc could be at stake.

“If we don’t survive with the eurozone we will not survive with the European Union,” Van Rompuy said.

Twenty-four EU states are currently running public deficits way above set limits of three percent of output.

Austrian Finance Minister Josef Proell meanwhile said his government would withhold its December installment of 190 million euros in aid to Greece, saying Athens had not met commitments made in return for its bailout.

It was a timely reminder of the constraints Ireland could expect to face if it accepted an aid package.

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