Brussels, 16/11/2010 (Agence Europe) - On Tuesday 16 November when speaking before the meeting of the Eurogroup, the European commissioner for economic and monetary affairs, Olli Rehn, expressed some concern about the turn the public debate was taking, hinting at a division among member states over the way to deal with the tricky situation in Ireland (see EUROPE 10256). Criticising the “existential alarmism” of some European officials, he called on European ministers to find a “sense of unity” again and show proof of “determination” in order to reach a “European solution” to promote financial stability in the eurozone. “I expect the Eurogroup to support this objective”, he said.
The commissioner thus took the opposite view to the president of the European Council, Herman Van Rompuy, who earlier in the day had spoken of the eurozone's need for “survival”. “I want to say that it is not a matter of survival of the euro, it is a matter of a very serious problem in the banking of Ireland”, Rehn said. Addressing the European Policy Centre think tank, Van Rompuy had pointed out that they would have to “work together in order to survive with the eurozone because if we do not survive with the eurozone we will not survive with the European Union” (see related article).
European solution. In order to find a European solution, the Irish authorities have contacted the Commission, the ECB and the IMF. According to Commissioner Rehn, the problems to be resolved directly concern the Irish banking sector, supported with up to €50 billion by the Irish state, even if these difficulties have an effect on the cost of refinancing the Irish sovereign debt. “The Irish sovereign debt is sufficiently financed until the middle of next year”, Rehn went on to point out, however. The ECB takes the view that the European Financial Stability Facility (EFSF) could be activated to soak up the losses incurred by the Irish banking sector, itself heavily subsidised by public funding and highly dependent on ECB liquidity. Germany is urging along these lines. This is one eventuality that Eurogroup President Jean-Claude Juncker had not ruled out when arriving in Brussels. “If Ireland needs help, we'll help Ireland. But Ireland has not yet asked for help”, French Minister Christine Lagarde put in. “The right thing is for us to have a mechanism in place, and to know how to operate it”, she added, referring to the EFSF. Awaiting the report from the Irish minister, German Finance Minister Wolfgang Schaüble expressed concern saying: “We worry that speculation drives the events and not the other way round”. Some countries, however, like Finland, consider that activation of the financial stability facility should only be done as a last resort and not simply to calm financial markets.
On Tuesday, Taoiseach Brian Cowen repeated before the Irish parliament that his country has not officially asked for help, AFP reports. He hoped the European Union would set solutions in place to manage the high cost of refinancing the sovereign debt in the eurozone. “The cost of money is quite simply too high (…). New initiatives must be found within the eurozone to manage this question”, he said. Facing a public deficit of over 30% for 2010, Ireland will next week present a four-year austerity plan to bring its deficit down to below 3% of GDP by 2014. Savings to be made in 2011 will double, going from three to six billion euro. (M.B./transl.jl)