Post date: Nov 21, 2010 10:48:8 PM
Ireland asks for financial bailout from the European Union, and says the request has been accepted.
DUBLIN, IRELAND (NOVEMBER 21, 2010) POOL - Ireland requested an international bailout on Sunday (November 21) to tackle its banking and budget crisis, the euro zone's second bailout this year as Brussels moves to protect Europe's wider financial stability.
"I can confirm that the government has today decided that Ireland apply for financial assistance at the European Union. The request of the government was transmitted to the European authorities this evening. The European authorities have agreed to our request," Irish Prime Minister Brian Cowen said at a news conference in Dublin.
The size of the rescue by the European Union and the International Monetary Fund has yet to be negotiated but is likely to be smaller than Greece's bailout last May.
"Put simply the Irish banks will become significantly smaller than they have been in the past so that they can gradually be brought to stand on their own two feet once more. The second key element of the agreement will be a program to reduce our budget deficit. Again, put simply, the government has to increase our taxes and reduce our spending to levels we can afford," Cowan said.
Finance Minister Brian Lenihan insisted that the Irish economy was basically sound.
"It is very important that we recall that dispite our budgetary difficulties and our banking difficulties there are underlying fundamentals in the Irish economy which are very very sound. We've seen a 6% increase in exports year on year this year. We have seen that our...it is estimated that our balance of payments will move into surplus next year, and when you agregate our public and private sectors we'll be paying our own way in the wider world," he said at the same news conference.
"I don't accept your contention, the premise to your question, that I am the bogeyman that you're looking for, no," Cowan said when pressed by reporters about his reponsibility for the problems that lead to the bailout request.
"I have always said that I take my share of responsibility, but I am also saying that all the decisions we took, all the decisions we took were taken in the national interest."
The European Central Bank said the aid would be provided under "strong policy conditionality".
EU policymakers have feared that Ireland's problems might spread to other euro zone members with large budget deficits such as Spain and Portugal, threatening a systemic crisis.
Irish banks, brought to the brink of collapse by exposure to a property and construction sector that slumped after the global financial crisis, have grown dependent on ECB funds and suffered
an exodus of deposits over the past six months.
Yields on Irish government bonds have shot up during the current crisis, meaning that the state would have to pay prohibitively high interest rates to borrow commercially.