CONFUSION SURROUNDS THE status of Ireland’s discussions on a possible financial bailout, with reports clashing at home and abroad over the weekend.

The government strongly denied that Ireland had entered talks about external funding this weekend, after a BBC report suggested that the country was in preliminary talks with EU about securing financial support.

However, the international media are now focusing on Minister for Justice Dermot Ahern’s statement yesterday that, while no application for assistance had yet been made, Ireland was not ruling out the possibility of seeking financial help.

Speaking on RTÉ’s The Week in Politics, Ahern said that “things are happening day by day” but repeated that no application had been made – saying suggestions that Ireland was in aid talks were “fiction”.

In an email statement, Ahern repeated that “ongoing contacts continue at official level with international colleagues in light of current market conditions” but added that “Ireland has made no application for external support”. Ahern also pointed out that the government is “fully funded till well into 2011″.

On Sunday, reports suggested that Germany was putting pressure on Ireland to seek help from the European Financial Security Fund before European finance ministers meet in Brussels on Tuesday.

The Department of Finance has admitted that talks on debt problems are on ongoing.

Bailout for the banks?

Meanwhile, the Irish Independent reports that Lenihan may seek EU funding for the banks in a bid to defend against the bailout for the country.

Irish banks have become increasingly reliant on the European Central Bank as the banking crisis worsens – the country sought €83bn in liquidity funding by the end of September, RTÉ reports.

While it seems Ireland has, so far, been resisting international pressure to submit to financial help, the real test will be whether Ireland’s cost of borrowing rises on Monday and Tuesday.

There has been a slight strengthening in bonds on Monday morning, however if this trend reverses the government’s position will look increasingly unstable.