Eurozone ministers put pressure on Ireland over bail-out
Europe heaps pressure on Ireland to accept a financial bail-out, as fears grow that a failure to do so would be catastrophic. Economics Editor Faisal Islam says it could all end in the courts.
Finance ministers from 16 Eurozone countries meet in Brussels later as leaders and experts warn that the survival of the single currency, as well as single economies, is at stake.
Last night Dublin again denied that it had sought help from the EU or the International Monetary Fund (IMF), with ministers stressing its sovereign debt is fully covered until next summer.
Contagion warning
Single currency counterparts will tell Finance Minister Brian Lenihan that if Ireland does not accept a bailout, and accept it quickly, a “contagion” would spread to other struggling economies.
Portugal most fears the possibility of “infection”, with its finance minister Fernando Teixeira dos Santos, expected to tell Mr Lenihan that Dublin’s problems are also his country’s and Greece’s, and potentially those of the entire eurozone.
Channel 4 News Economics Editor Faisal Islam says that a German attempt to ensure that the “financial fatcats” who helped cause the economic crisis share the burden of paying for it has complicated the Irish issue. He says that the courts – as well as the EU – could become involved.
The UK will not be represented at the 16-nation eurozone talks, but will be present on Wednesday at a routine meeting of all 27 EU finance ministers.
Yesterday, David Cameron described the importance of Ireland’s economy to Britain.
He told the Commons: “If you look at the Irish economy, Ireland is an enormously important trading partner with Britain. It’s a fact that we actually export more to Ireland than we do to Brazil, Russia, India and China combined,” he said.
And German Chancellor Angela Merkel yesterday said that the future of the single currency could be at stake if Europe suffers a resurgence of a Greek-style crisis fuelled by speculators gambling on the euro’s plight.
Permanent Crisis Resolution Mechanism.
It is the name of a German initiative to ensure that financial fatcats as well as innocent taxpayers take a hit from overlending to profligate eurozone periphery nations and banks.
A well-intentioned effort by Chancellor Merkel at sharing the burden of dealing with credit excess, that seems today to have inadvertently sent the eurozone a few stages down the loop of doom.
Read Faisal Islam's blog.
Until now, Irish Prime Minister Brian Cowen has insisted the Government is intent on overcoming its own fiscal problems – which include a deficit running at 32 per cent of its GDP.
That compares with a maximum deficit level permitted under the single currency of just three per cent.
One of the options for Ireland is to take up what the European Commission called a “financial backstop” in the form of a 60 billion euro (£50.94bn) European Financial Stability Mechanism bailout fund which includes a potential UK liability of about £7bn.
However, guarantor member states would only be liable if Ireland defaulted on any emergency loan.
An Irish Government four-year plan designed to fix the economic crisis is due to be published next week.