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Debt crisis team on way to Dublin

Lenihan maintains Ireland had been “the point of attack” on the state of the euro in recent weeks – but commentators believe ECB, IMF and EC officials coming here to lay groundwork for bailout.

Image: Virginia Mayo/AP

A TEAM OF officials from the European Commission, the ECB and the IMF are heading to Dublin for a “short but focused discussion” with the Government on our debt crisis.

Finance Minister Brian Lenihan, speaking on Morning Ireland today, said that the discussions will begin tomorrow. He said he wasn’t going to put a deadline on the talks but that they were “urgent”.

The officials’ trip to Ireland is believed to be intended to lay the groundwork for a rescue package for Ireland. The UK Chancellor George Osborne has also indicated that it would be prepared to pump billions in loans into helping the bailout, a move the Financial Times describes as “more palatable to his Conservative party’s Eurosceptic members than joining in an EU package”.

Commenting on the possibility of a loan from the UK, Brian Lenihan said this morning:

In general the UK has not participated in European-wide assistance but I know that the British authorities are anxious that any assistance Ireland needs be given. If Britain wishes to participate, that is a matter for Britain.

He also maintained that the ECB “has stood fully behind the (banking) system” and said that Ireland had been “the point of attack” on the euro currency in recent weeks. Asked directly about how much of a bailout the Irish Government would accept and what interest rates would be applied to paying it back, Minister Lenihan refused to be drawn. “We’re not at that stage yet – we are looking at the structural problems in the system”.

However, Eurogroup chairman Jean-Claude Juncker vowed yesterday at the talks between eurozone finance ministers that the “financial stability of the euro area” would be safeguarded and that the Eurogroup would take action to ensure that happened.

Finance ministers from the 17 nations had met to discuss the eurozone debt crisis, which other heavily indebted countries like Spain and Portugal fear could result in them being also forced to seek international assistance as investors treat their bonds just as they have done Ireland’s ones.

Brian Lenihan had told that meeting, the Irish Times reports, that he had no mandate to negotiate a bailout deal on Ireland’s behalf.

Juncker also said that the Eurozone’s finance ministers (or ‘Eurogroup’) believed Ireland should include an annual review of its financial systems in its Budget, so as to better insulate itself from “less favourable macro-economic developments were they to arise”.

Similar sentiments were later echoed in a statement issued by the Eurogroup, which reiterated support for the Irish four-year budgetary strategy and the government’s moves to frontload €6bn of the total €15bn in adjustments.

Klaus Regling, who would be tasked with organising emergency funding for Ireland if it decided to seek it, said that the fund could “mobilise substantial sums” within days, and said he had already begun exploratory talks with potential emergency investors.

These meetings had gone well, he said, with Asian investors particularly positive about the prospect of emergency investments in a struggling eurozone country.

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He refused, however, to give an indication of how much money could be made available – saying this would be dependant on the circumstances of the assistance being sought.

The press conference brought an end to a torrid day which had earlier seen Brian Cowen tell the Dáil there had been no moves by Ireland to set about seeking international assistance, insisting that the state was adequately funded until the middle of 2011.

Cowen had acknowledged, however, that Brian Lenihan – who attended last night’s Eurogroup meeting, and will today take part in a full meeting of the 27 European finance ministers – was still participating in discussions aimed at investigating how Ireland would be best placed to assist in quelling the fear gripping Eurozone countries that they may be forced into seeking bailouts en masse.

Europe minister Dick Roche had also earlier denied admitting to ITV News that he anticipated Ireland seeking a bailout in order to fund its banking sector, after the journalist who interviewed him said Roche believed such a bailout would likely be finalised today.

A senior EU official, meanwhile, had said Ireland was already in discussions with the IMF about securing funding for both the state and the banking sector, which has seen its ability to operate hampered by the high interest rates international lenders currently demand of it to borrow short-term funds for retail operations.

About the author:

Gavan Reilly

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