Roddy Thomson Brussels
Europe moved closer yesterday to bailing out a euro zone state for the second time this year, as it launched a joint mission with the International Monetary Fund (IMF) to step up talks to support Ireland’s devastated banks.
Hours after euro zone finance ministers vowed to act to protect the stability of the single currency area, Britain announced that it also stood ready to rally to its neighbour’s side although Dublin has yet to ask for any money.
“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,” British Finance Minister George Osborne said ahead of a meeting with EU counterparts in Brussels.
European Economic Affairs Commissioner Olli Rehn said it was “natural” for Britain to get involved since British banks had “very significant exposure in Ireland” and “very strong interconnections in the banking sector”.
With Ireland’s borrowing costs shooting through the roof, euro zone finance ministers announced late on Tuesday that they would act in a “determined and co-ordinated” way to protect the euro, under threat again six months after Greece’s bailout.
Experts from the European Commission, the European Central Bank and the IMF were expected to arrive in Dublin today to step up talks on a bank aid programme.
“The situation is very pressing and very, very serious and we don’t have any time to waste,” Rehn said. “It is essential that confidence in the Irish banking sector is restored for the sake of financial stability over Europe and for the sake of restoring confidence in the real economy.”
The head of euro zone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, said the Irish government would decide in the coming days whether to accept a bailout for its banks.
There are fears among euro partners for the broader stability of the soon-to-be 17-nation euro zone, after a bottomless banking bailout pushed Ireland’s public deficit beyond 30 percent of output this year.
Ireland has resisted pressure to accept aid, and on Tuesday Irish Finance Minister Brian Lenihan still insisted that Dublin “did not commit to enter a facility” even though it would hold more intensive talks on an aid package.
“What we have agreed to do is to look at the structural problems in the Irish banks in the light of recent market pressures and assess what needs to be done because banking questions are technical and difficult,” he said yesterday.
“An intensive engagement will now take place which will ensure that we can stabilise our banking sector.” The discussions would begin today.
Asked if there could be an outcome by the weekend, Lenihan said: “We haven’t set deadlines on this but it is urgent and it will be focused.”
In Washington, the IMF said a “short and focused consultation” would have as its goal “to determine the best way to provide any necessary support to address market risks.”
Irish Prime Minister Brian Cowen insisted to legislators that the unfolding discussions were about seeing how “irrational” markets could be “taken out of the equation”. Ireland should not become “enslaved” to ruthless traders, he argued.
The heat is also on after Northern Ireland Sinn Fein leader Gerry Adams announced his resignation from UK politics to seek office in the Irish parliament amid demands for a snap general election over the government’s handling of the crisis. – Sapa-AFP