EUROPEAN FINANCE ministers agreed last night to release a multi-billion euro assistance package for Ireland.
A source briefed on the talks said a sum between €80 billion and €90 billion was likely to be involved but a statement from the finance ministers did not specify the amount.
German finance minister Wolfgang Schäuble tried to play down fears that the EU authorities were increasingly concerned about contagion. He said the amount of aid to be granted was still under discussion.
The looming bailout, only the euro zone’s second, comes six months after the European authorities agreed to provide €110 billion in emergency loans to Greece.
It includes a fund for the potential future capital needs of the banking sector.
“Ministers welcome the request of the Irish Government for financial assistance from the European Union and euro area member states,” said a statement from EU ministers.
“Ministers concur with the commission and the European Central Bank that providing assistance to Ireland is warranted to safeguard financial stability in the EU and in the euro area.”
The ministers’ statement was issued almost simultaneously with the Government’s own statement and it also pointed to the likelihood of bilateral loans from Britain and Sweden.
The decision to grant the request marks the culmination of an extensive effort by the European and IMF authorities to avoid a repeat of the disruption and months-long delays that characterised the Greek debacle.
That affair was swiftly followed by the creation of €750 billion in funding lines that the Government now hopes to make use of.
An emergency teleconference of euro zone finance ministers started yesterday evening at 5pm Dublin time, some four hours after Minister for Finance Brian Lenihan declared on RTÉ radio that the Government would be seeking external aid.
Finance ministers from non-euro countries were also involved.
The aid will come from the European Financial Stability Facility (EFSF), the Luxembourg-based €440 billion loan guarantee scheme which was set up during the summer. A €60 billion scheme operated by the European Commission will also be tapped.
The approval of any aid from the IMF would be made under a separate procedure.
As the talks continued last night, an informed source said it was clear from the engagement that the aid agreement would not compel the Government to increase the 12.5 per cent corporation tax rate. The statement said the recovery programme to be agreed with the European Commission would address the fiscal challenges of the Irish economy “in a decisive manner”.
“It will build on the fiscal adjustment and structural reforms that will be put forward by the Irish authorities in their four-year budgetary strategy next week.”
A crucial strand of that document is its reliance on the 12.5 per cent rate as a core element of Irish industrial policy.
“Given the strong fundamentals of the Irish economy, decisive implementation of the programme should allow a return to a robust and sustainable growth, safeguarding the economic and social cohesion,” the statement said.
“By building on the measures already taken by Ireland to address stress in its banking sector, a comprehensive range of measures – including deleveraging and restructuring of the banking sector – will contribute to ensuring that the banking system performs its role in the functioning of the economy,” the statement said.