Brussels, 17/11/2010 (Agence Europe) - On Tuesday 16 November 2010, Ireland came closer to receiving financial aid from the European Union. Considering that the market conditions for the proper functioning of Irish banking and the cost of re-financing the country's sovereign debt have not yet returned to normal, the Eurogroup welcomed the Irish government's determination to carry out a short, targetted consultation with the European Commission, the ECB and the IMF to decide on the best way of providing any support needed to deal with market risk, particularly for banking, in the four-year budget programme and the future budget.
In a joint press conference with Hungarian Prime Minister Viktor Orban, as the Ecofin Council was going on, European Commission President José Manual Durão Barroso said that the Commission had not been put under any pressure by Ireland to intervene. Swift and decisive action is expected of the Irish authorities.
Representatives of the above-mentioned three international bodies have been in talks with the Irish government since Sunday and will travel to Dublin on Thursday to make a needs assessment. The chair of the Eurogroup, Jean-Claude Juncker, said the talks would provide all the elements and instruments needed should Ireland request aid from the EU, the IMF and Eurogroup. The Irish government has not yet made any official request for aid. Next week, it will unveil its four-year austerity programme and at the beginning of December, its draft budget for 2011. Facing a deficit of 32% of GDP because of the cost of bailing out its banks (to the tune of €50 billion), Ireland has set the objective of returning to below the 3% mark for its public deficit in 2014.
EU Economic and Monetary Affairs Commissioner Olli Rehn approves of the intensification of talks on financial aid so that it can be provided should it be required. Asked about the nature of the fact-finding mission to Dublin, he said that the technical talks would cover the budget and the banks. Given the interlocutors involved, a potential aid package for Ireland could involve the European Commission, ECB and/or IMF. Neither Juncker nor Rehn would comment on the scale of any potential aid package or how much would be provided by which institution.
French Finance Minister Christine Lagarde said that the details were being examined and Ireland was different from Greece, in that Ireland's sovereign debt is under control, but three banks which have been restructured require further targetted aid. In what form? Lagarde said that whether or not this would be like the Greek aid package would be decided by the work in progress. She pointed out that the EU already has an instrument that can raise funding. She did not rule out the idea of the United Kingdom providing loans to Ireland. The British offer of aid to Greece was not taken up. The media suggests that two types of aid packages are being discussed - a €50 billion package for banks alone and a €100 billion to help the Irish government restore credibility to its public finances.
In May 2010, eurozone ministers set up a financial stability system comprising an EU section of €60 billon, an intergovernmental section, the European Financial Stability Facility (EFSF), of national guarantees worth €440 billion calculated for each contributing country as a share of their contribution to the ECB's capital and IMF funding of €250 billion. Attending the Eurogroup meeting, the EFSF Director, Klaus Redling, said that it would take the EFSF between five and eight days to raise cash on the markets once a member state's request for aid is approved by the ECOFIN Council. The amount of cash to be raised would depend on the type of aid to be provided, he explained. EFSF loans can only to provided to sovereign states, not to the private sector. Activating the EFSF, along with IMF aid, would be subject to drastic structural adjustment measures. Rehn has already mentioned the low rate of company tax in Ireland (12.5%). The €130 billion of cash for Irish banks provided by the ECB at a low interest rate are not accompanied by special conditions. On Wednesday 17 November, the chair of the ECOFIN Council, Didier Reynders, said that he was confident that it would be very difficult for the ECB to go further than at present in supplying cash to banks in the various member states, with Ireland perhaps taking pride of place. He mentioned his own experience of bailing out the Belgian banking system in 2008. Earlier on Wednesday, he said on Belgian radio that a European aid package was almost inevitable. (M.B./transl.fl)