Tags: Ireland | Need | 114 Billion | Rescue

Ireland Said to Need $114 Billion for Rescue

Tuesday, 23 Nov 2010 02:33 PM

European Union officials estimate that a rescue package for Ireland may amount to about 85 billion euros ($114 billion), according to two officials familiar with the talks.

The European Commission cited the figure as a preliminary estimate on a conference call of euro-region finance ministers on Nov. 21, said the people, who spoke on condition of anonymity because the talks were private. Of the total, 35 billion euros would be earmarked for banks and 50 billion euros to help finance the Irish government.

Contagion is spreading through the euro region as Ireland hammers out an aid package with the EU and the International Monetary Fund to rescue its banking system. Spanish bonds tumbled, pushing the extra yield that investors demand to hold its 10-year debt over German bunds to a euro-era record of 236 basis points. Irish bonds also dropped today.

“The markets currently have virtually zero confidence that the bailout in Ireland will solve the European crisis,” Charles Diebel and David Page, fixed-income strategists at Lloyds TSB Corporate Markets in London, wrote in a note today. “With markets effectively in a position to dictate policy, the risk is that the credibility crisis shifts to more sizeable EU countries and thereby poses a greater risk to the system as a whole.”

The euro dropped 1.8 percent to $1.338 as of 4:25 p.m. in London. The yield on Ireland’s 10-year bond rose 33 basis points to 8.644 basis points. It was at 8.347 percent on Nov. 19, before the bailout was announced.

Economists’ estimates on the size of Ireland’s bailout have varied. Goldman Sachs Group Inc. says Ireland may ask for about 95 billion euros. UniCredit SA put the package at as much as 85 billion euros, while Deutsche Bank AG sees a 90 billion-euro plan.

“The overall figure is linked to the outcome of the current discussions on the three-year EU-IMF program, which includes also potential capital needs for the banking sector,” Amadeu Altafaj, spokesman for EU Economic and Monetary Affairs Commissioner Olli Rehn, said by telephone in Brussels.

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European Union officials estimate that a rescue package for Ireland may amount to about 85 billion euros ($114 billion), according to two officials familiar with the talks. The European Commission cited the figure as a preliminary estimate on a conference call of...
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Tuesday, 23 Nov 2010 02:33 PM
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