Irish Premier: we have not asked EU for financial help
The Taoiseach Brian Cowen has again denied that he has asked the EU for help to solve the Irish financial crisis. But Faisal Islam says the pressure is still on Dublin to accept support.
Speaking to the Irish parliament the Dail, Mr Cowen was upbeat about his country’s financial health: “We remain open for business and are still a destination of choice for many global firms, ” he said.
He also offered reassurance that the Irish government would honour bank deposits in the Irish banking system and pledged to apply to extend the deposit protection scheme for a further year.
Dismissing reports of behind-the-scenes talks on securing a rescue package from the European Financial Stability Facility, Mr Cowen said the country was fully funded until next July.
“We’ve made no application whatsoever for funding,” he said.
Euro issues
Amid fears that the Irish government was trying to ease runaway interest rates on global money markets, the Taoiseach said there were issues for the euro on which Ireland was working with EU partners.
“We are part of a wider currency area and there are issues for the euro currency… we are co-operating with our colleagues on those issues,” he said.
Mr Cowen said he would work with European partners in coming weeks and months to make sure the euro remains stable. Earlier, five European Union finance ministers – Britain’s George Osborne, Christine Lagarde of France, Wolfgang Schauble of Germany, Italy’s Giulio Tremonti and Spain’s Elena Salgado – broke off from the G20 summit in Seoul for talks on Ireland’s economic crisis.
In an unusual move, Mr Osborne united with Eurozone counterparts and put to one side the tradition of allowing them to manage issues within the single currency region. The Chancellor said: “We should support the Irish Government in the steps that it is taking.”
In a joint statement the five finance ministers insisted that banks and investors lending to Ireland would not face losses on loans: “Any new (bailout) mechanism would only come into effect after mid-2013 with no impact whatsoever on the current arrangements”.
Channel 4 News Economics Editor, Faisal Islam, who is in Brussels for the eurozone negotiations says the final decision on support for Ireland may be deferred until tomorrow, when Mr Osborne arrives at the wider summit of EU finance ministers.
'Extraordinary moment'
What an extraordinary moment we have tonight in Europe's economic history.
In the Brussels European Council building where I am right now, Ireland is under inordinate pressure to take tens of billions of euros - perhaps as much as €100 bn - in emergency support.
This is no ordinary rescue, you could call it 'forced medicine'. It appears that the eurozone needs Ireland to be rescued more than Ireland wants to be rescued.
Read Faisal Islam's latest blog from Brussels.
‘Crisis not Irish government’s fault’
News reports have cited eurozone sources confirming negotiations taking place between Ireland and EU officials on tapping into the financial stability fund set up in the wake of the Greek economic crisis.
But Mr Cowen said there was no immediate need for a bailout: “We have funding up to mid-year… we don’t have to borrow any money in respect of the sovereign debt, the sovereign issues that affect the government and running of the country.” Mr Cowen added that there were options “domestically and nationally” available to Ireland after that.
The Irish finance minister Brian Lenihan, claimed the soaring interest rate for Irish state borrowing was not because of the actions of his government and he said the markets feared “further black holes in the Irish banking system”.
“This is not Ireland’s fault, or the government’s fault. This is part of a wider international problem and can only be dealt with as part of an international problem,” the minister said.
He added: “It comes back to the fundamental point which I have reiterated in the last two years – if you want to tell your bank manager that you don’t want to pay that has very, very dramatic consequences. We would have a real crisis if we decide that should be our policy.”
Solidarity
The statement by the ministers was being seen as clarification that private investors will not be saddled with losses on Irish bonds for the next three years.
On a visit to Belfast, Ireland’s European Commissioner Maire Geoghegan-Quinn, said the Minister’s statement was a show of solidarity: “I think they want to help and they are basically putting out that public statement to say we’re here, we want to help,” she said.
Dublin’s affairs were said to be a hot topic at the G20 in Seoul after a week of market jitters about a possible debt default pushed yields on Irish 10-year bonds up beyond 9 per cent. The subsequent statement by the ministers appeared to have the desired effect with interest rates coming down to the 8.5 per cent mark.
Ireland is now facing a delicate three weeks as the Government puts together a drastic 6bn euro slash-and-burn budget. Taxes look set to increase by 1.5bn euros while government departments and state agencies will have to live with 4.5 billion euro spending cuts.