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Ireland applies for EU-IMF bailout
By Shawn Pogatchnik |
November 23, 2010, Tuesday
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Print Edition
Print Edition
DEBT-CRIPPLED Ireland has formally applied for a massive EU-IMF loan to stem the flight of capital from its banks, joining Greece in a step unthinkable only a few years ago when Ireland was a booming Celtic Tiger and the economic envy of Europe.
European Union finance ministers quickly agreed in principle to the bailout, saying it "is warranted to safeguard financial stability in the EU and euro area." But all sides said on Sunday further weeks of negotiations loomed to define the fund's terms, conditions and precise size.
Ireland's crisis, set off by its foundering banks, drove up borrowing costs not only for Ireland but for other weak links in the eurozone such as Spain and Portugal. Ireland's agreement takes some pressure off those countries, but they still may end up needing bailouts of their own.
Irish Finance Minister Brian Lenihan said Ireland needed less than 100 billion euros (US$140 billion) to use as a credit line for its state-backed banks, which are losing deposits and struggling to borrow funds on open markets. He said the loan facility could last anywhere from three to nine years.
Ireland has been brought to the brink of bankruptcy by its fateful 2008 decision to insure its banks against all losses - a bill that is swelling beyond 50 billion euros and driving Ireland's deficit into uncharted territory.
The country had long resisted a bailout, but Lenihan said it was now painfully clear that Ireland needed "financial firepower" immediately to complement its own cutthroat plans for recovery.
The country of 4.5 million now faces at least four more years of deep budget cuts and tax hikes totaling at least 15 billion euros just to get its deficit - bloated this year to a European record of 32 percent of GDP - back to the eurozone's limit of 3 percent by 2014.
European Union finance ministers quickly agreed in principle to the bailout, saying it "is warranted to safeguard financial stability in the EU and euro area." But all sides said on Sunday further weeks of negotiations loomed to define the fund's terms, conditions and precise size.
Ireland's crisis, set off by its foundering banks, drove up borrowing costs not only for Ireland but for other weak links in the eurozone such as Spain and Portugal. Ireland's agreement takes some pressure off those countries, but they still may end up needing bailouts of their own.
Irish Finance Minister Brian Lenihan said Ireland needed less than 100 billion euros (US$140 billion) to use as a credit line for its state-backed banks, which are losing deposits and struggling to borrow funds on open markets. He said the loan facility could last anywhere from three to nine years.
Ireland has been brought to the brink of bankruptcy by its fateful 2008 decision to insure its banks against all losses - a bill that is swelling beyond 50 billion euros and driving Ireland's deficit into uncharted territory.
The country had long resisted a bailout, but Lenihan said it was now painfully clear that Ireland needed "financial firepower" immediately to complement its own cutthroat plans for recovery.
The country of 4.5 million now faces at least four more years of deep budget cuts and tax hikes totaling at least 15 billion euros just to get its deficit - bloated this year to a European record of 32 percent of GDP - back to the eurozone's limit of 3 percent by 2014.
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