Tags: EU | Juncker | Bailout | Ireland | Not | Imminent

EU’s Juncker Says Bailout for Ireland Not Imminent

Monday, 15 Nov 2010 01:45 PM

Ireland is not close to asking for an EU rescue, Eurogroup Chairman Jean Claude-Juncker was quoted as saying on Monday, but an Irish opposition leader said moves to support Dublin were already under way.

With pressure growing for quick action to prevent its crisis spilling over into other euro zone countries, the Irish government denied it would need a bailout.

But a senior member of the European Central Bank confirmed discussions were under way with Dublin and said that aid, if requested, would be available for Ireland's banks or for the state itself.

The governor of the Bank of Spain, one of a number of countries on the euro zone's periphery which has debt problems and has seen its borrowing costs spiral as a result of Ireland's troubles, prodded Dublin to act quickly by saying its indecision had increased jitters on financial markets.

There was some market speculation that euro zone finance ministers could announce some form of support after a meeting on Tuesday, but Juncker -- the group's chairman -- said Ireland had not requested aid and that a deal was not imminent.

"The Irish think that they can keep the problems they're facing under control," he told news agency Bloomberg." They are not near the point where they would ask for external help."

Economists say Prime Minister Brian Cowan's government may be able to wait until after a by-election later this month.

Irish opposition finance spokesman, Michael Noonan, told the BBC: "I'm extremely concerned. I think the reports (of an imminent bailout) over the weekend are true ... I think there is European intervention under way."

Portuguese Finance Minister Fernando Teixeira dos Santos also told Reuters there were no plans for it to request emergency foreign funding after the Financial Times quoted him as saying there was a high risk Lisbon would have to seek aid.

"Such a request is not imminent, there are no contacts, be it formal or informal," Teixeira dos Santos told Reuters. "The rest are rumors and speculation."

GREEK SCENARIO

Noonan, who could become Ireland's finance minister if the government falls, said that a bailout could lead to Ireland being suspended from bond markets for three or four years.

Ireland's high borrowing costs and large deficit have caused fears of a Greek-style scenario where budget problems in one country plunge the entire euro zone into crisis, even though Ireland's debt requirements are funded until mid-2011.

The Irish government has been reluctant to apply for assistance, partly because it faces a by-election it can ill afford to lose on Nov. 25 and also because it says it wants to preserve its sovereignty.

But the Irish Independent newspaper said the government was considering asking for money for its banks, a politically less risky move than asking for a state bailout.

European Central Bank Vice President Vitor Constancio said Ireland had been talking to European institutions but there had not yet been a formal request for assistance.

"The Irish state is financed until part of next year, but it is also a problem of the banks that are at the centre of the problems in Ireland and considerations have to be pondered," he told a news conference in Vienna.

Constancio said such help, if needed, could involve the 440 billion euro European Financial Stability Facility (EFSF) set up after Greece was forced to seek help in May.

EU sources say aid under discussion ranges from 45 billion to 90 billion euros ($63 billion-$123 billion), depending on whether Ireland needs support for its banks.

GERMANY CRITICISED

Ireland and others say Germany has aggravated problems by pushing the idea of asset value reductions or "haircuts" for private bondholders under a permanent euro zone rescue mechanism which Berlin wants in place from 2013.

Greek Prime Minister George Papandreou said Berlin's demand that banks and bond markets share the pain of a sovereign debt default could push some euro zone economies towards bankruptcy.

"It created a spiral of higher interest rates for countries that seemed to be in a difficult position, such as Ireland or Portugal," Papandreou said during a visit to Paris.

"This could create a self-fulfilling prophecy ... This could break backs. This could force economies towards bankruptcy."

Bank of Spain Governor Miguel Angel Fernandez Ordonez, a member of the ECB's governing council, told a banking conference in Madrid he expected an "appropriate reaction" by Ireland to help calm markets.

He later told reporters: "The situation in the markets has been negative due in some part to the lack of a decision by Ireland. It's not up to me to make a decision on Ireland, it's Ireland that should take the decision at the right moment."

Ewald Nowotny, another ECB governing council member, said in a radio interview the EU wanted a "quick, good solution to Ireland, so that there will be no spill-over" to other heavily indebted countries such as Portugal and Spain.

Ireland's borrowing costs shot to record highs in the past week on concerns over a deficit set to hit 32 percent of gross domestic product this year and growing borrowing costs.

Lenihan has promised to pump up to 50 billion euros ($68 billion) into the banks and has pledged a four-year debt-cutting plan will be published before the month is out, with a full 2011 budget following early in December.

But pressure is mounting to produce concrete plans sooner.

© 2017 Thomson/Reuters. All rights reserved.

   
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Ireland is not close to asking for an EU rescue, Eurogroup Chairman Jean Claude-Juncker was quoted as saying on Monday, but an Irish opposition leader said moves to support Dublin were already under way. With pressure growing for quick action to prevent its crisis...
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Monday, 15 Nov 2010 01:45 PM
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