EU/IMF to commence talks on rescue plan for Ireland
European Union and IMF officials will commence talks with Irish regulatory authorities tomorrow as international efforts to agree a rescue plan for Ireland continue.
The EU's commissioner for economic affairs, Olli Rehn, said today the talks would focus specifically on two areas, the State’s fiscal position and the banking sector.
However, he warned that neither of the EU’s rescue mechanisms, the European Financial Stability Mechanism or the European Financial Stability Facility, could be used to provide "direct lending" to the Ireland's banking sector.
Instead the rescue package would have to be done through a "country programme with an emphasis on strengthening the banking sector".
The Irish banking sector has to be made "viable and sustainable", he said and "this will require quite some reorganisation and restructuring," Mr Rehn said after finance ministers ended a monthly meeting in Brussels.
The White House expressed confidence in Europe's ability to handle the debt crisis.
"We continue to believe, as we did with Greece, that Europe has the ability to deal with the crisis in Ireland and possibly in other countries," White House spokesman Robert Gibbs told reporters.
A delegation from the European commission, the European Central Bank and the International Monetary Fund will meet with officials in Dublin tomorrow after euro zone finance ministers last night backed moves to intensify preparations for rescue plan for Ireland.
Market reaction today was muted with the yield on Irish Government 10-year bonds rising marginally to 8.278 per cent, up .036 per cent on the day.
Fine Gael leader Enda Kenny claimed in the Dáil the EU/IMF delegation was coming to Ireland “effectively to dictate the terms of a bailout to the Irish Government and the Irish State”.
He said “the white flag has been raised. The towel has been thrown in and like the prowler waves of the west coast they’re coming on Thursday. And they’re not coming in here to say ‘well done Brians, well done lads, keep at it, you’re doing a great job'.”
But Taoiseach Brian Cowen insisted “there has been no dictation from anybody. What we’re involved in here is working with colleagues in respect of currency problems and euro issue problems that are affecting Ireland, they’re affecting other countries. They’re particularly affecting Ireland at the moment.”
He stressed that “there has been no question, as has been stated all over the weekend, of a negotiation for a bailout”.
Speaking later on RTÉ Six One News, Mr Cowen said there were no obvious solutions to the country's problems.
"There are sensible, precautionary discussions taking place at the moment. We're working collaboratively with people. I don't think we should see this as a threatening situation."
'"There are no obvious solutions here until we work out what's best for the country," he added.
Britain's banks had a $222 billion (€163.4 billion) exposure to their Irish counterparts by end of the first quarter, according to the Bank for International Settlements. The country said today it stood ready to help, although it was unclear what steps it might take to assist Ireland.
"Ireland is our closest neighbour and it's in Britain's national interest that the Irish economy is successful and we have a stable banking system," chancellor of the exchequer George Osborne told reporters ahead of an EU finance ministers meeting in Brussels.
Minister for Finance Brian Lenihan said the Government will accept European Union support if the banking crisis is too big for Ireland to fix on its own.
Mr Lenihan said this morning it would work with its EU partners to address structural problems in the Irish banking system, but he refused to set a deadline for the end of talks, which are set to begin tomorrow.
He said a "short focused consultation" with officials from the European Central Bank (ECB), EC, and International Monetary Fund (IMF) would start in Dublin tomorrow.
Mr Lenihan insisted Europe stood "shoulder to shoulder" with Ireland and that the ECB was "fully behind" the Irish banking system.
"Despite a large range of measures adopted by the Government, Ireland is a small country, and if the banking problems in the country are too big for this small country to manage, Europe is making it clear that they will help and help in every possible way to secure the system," he said.
The Minister said the ECB was standing "fully behind" the Irish banking system and said there was no funding problem for the Irish banking system, adding: "There is no need to have any concerns over safety of banking deposits."
Mr Lenihan refused to be drawn into any detail over cost of any bailout package, and he defended the bank guarantee, saying the Government's action had been backed by Europe's finance ministers.
He said the reality was that without the bank guarantee, the State would not have a banking system, and consequently a huge loss of jobs, credit and enterprises. "The guarantee shored up the system for a while, but of itself it has not been sufficient," Mr Lenihan said.
The Minister said on RTÉ radio the Government was considering the four-year budgetary plan this week and would publish it before the end of the month. He added that the budget will go ahead as scheduled on December 7th.
German finance minister Wolfgang Schaeuble today said the European Union is "ready to act" to help Ireland.
But Estonia's finance minister Jurgen Ligi said Ireland needs more budget austerity to solve its debt problems.
The decision to proceed with preparations for an EU/IMF plan for Ireland was taken during a three-hour meeting last night at which Mr Lenihan said he had no mandate from the Government to negotiate a bailout.
It comes against the backdrop of mounting anxiety in the European Central Bank (ECB) that the banks’ increasing reliance on exceptional support and concern that the €45 billion bailout bill might have to increase.
The terms of reference for the talks, read out last night by euro group president Jean-Claude Juncker, say engagement will determine the “best way” to provide any support required to address market risks especially in the banking sector.
“Market conditions have not normalised and pressures remain, giving rise to concerns that further reforms and stabilisation measures may be appropriate,” said Mr Juncker, who is Luxembourg’s prime minister.
Mr Juncker said he expected “within the coming days” a definitive decision on whether Ireland would seek a bailout.