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Ireland in talks with EU over debt crisis
By Shawn Pogatchnik |
November 16, 2010, Tuesday
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Print Edition
Print Edition
DEBT-BURDENED Ireland is talking with other European Union governments about how to handle its troubled finances, officials said yesterday as the continent's debt crisis plagued markets and policymakers across Europe.
Irish officials however denied they were seeking a lifeline from the EU's bailout fund.
With fears mounting that Ireland could become the next eurozone country after Greece to be bailed out, the Department of Finance said in a statement it was pursuing "contacts at official level." Aides to Finance Minister Brian Lenihan, however, emphasized Ireland has no need for emergency aid given it has enough funds to operate through mid-2011.
Ireland is struggling to prop up its failed banks and simultaneously to slash a deficit that has ballooned this year to a staggering 32 percent of GDP, a record for post-war Europe.
While Greece spent its way to disaster, much of Ireland's 2010 deficit involves the government's 45 billion euro (US$61.34 billion) takeover of five banks that ran into trouble after the real estate boom collapsed.
EU chiefs are anxious to quell market fears of an eventual Irish debt default. Those fears are driving up the borrowing costs of other EU nations saddled with red ink, notably Greece, Spain and Portugal.
Analysts said investors needed the finance ministers in Brussels to offer a clear path forward for Ireland, otherwise they would continue to dump the bonds of EU's peripheral nations in favor of German bonds.
Finance department officials declined to comment on Irish media reports that the government is discussing whether the EU fund could be used to support the short-term cash needs of particular Irish banks, rather than the state. Three of the five bailed-out banks have already been nationalized, and Allied Irish Banks appears certain to be nationalized within weeks. Only Bank of Ireland has been able to borrow money on the open market.
Irish Finance Minister Lenihan is traveling today to Brussels to discuss the Irish crisis - and its impact on the rising debt costs of other European nations - with fellow finance ministers across the 27-nation union.
Irish officials however denied they were seeking a lifeline from the EU's bailout fund.
With fears mounting that Ireland could become the next eurozone country after Greece to be bailed out, the Department of Finance said in a statement it was pursuing "contacts at official level." Aides to Finance Minister Brian Lenihan, however, emphasized Ireland has no need for emergency aid given it has enough funds to operate through mid-2011.
Ireland is struggling to prop up its failed banks and simultaneously to slash a deficit that has ballooned this year to a staggering 32 percent of GDP, a record for post-war Europe.
While Greece spent its way to disaster, much of Ireland's 2010 deficit involves the government's 45 billion euro (US$61.34 billion) takeover of five banks that ran into trouble after the real estate boom collapsed.
EU chiefs are anxious to quell market fears of an eventual Irish debt default. Those fears are driving up the borrowing costs of other EU nations saddled with red ink, notably Greece, Spain and Portugal.
Analysts said investors needed the finance ministers in Brussels to offer a clear path forward for Ireland, otherwise they would continue to dump the bonds of EU's peripheral nations in favor of German bonds.
Finance department officials declined to comment on Irish media reports that the government is discussing whether the EU fund could be used to support the short-term cash needs of particular Irish banks, rather than the state. Three of the five bailed-out banks have already been nationalized, and Allied Irish Banks appears certain to be nationalized within weeks. Only Bank of Ireland has been able to borrow money on the open market.
Irish Finance Minister Lenihan is traveling today to Brussels to discuss the Irish crisis - and its impact on the rising debt costs of other European nations - with fellow finance ministers across the 27-nation union.
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