Irish Central Bank chief sees EU offering ‘substantial loan’

Ireland could receive “tens of billions” of euros as part of an ­EU-IMF bailout, the head of Ireland’s Central Bank said yesterday as international experts began examining the country’s finances.

Patrick Honohan said it was his “expectation” that a “very substantial loan, tens of billions,” would be made to prop up the crisis-hit economy, in one of the clearest signs yet that Ireland was prepared to accept help.

“It’s not my call. It’s the government at the end. It’s my expectation that that is what is likely to happen,” Mr Honohan told RTE Radio.

The mission from the European Union, the European Central Bank and the International Monetary Fund arrived in Ireland yesterday to assess the financial situation of the debt-wracked eurozone country.

The visit comes amid growing signs that Ireland could become the second troubled eurozone economy after Greece to be bailed out this year.

Debt burdens weighing on both countries, as well as on Portugal, have caused consternation in European financial circles where it is feared the future of the eurozone could be at stake.

Jean-Claude Trichet, head of the European Central Bank, yesterday voiced “grave concerns” about economic governance in the euro area in what he called an “exceptionally demanding and uncertain” environment.

Speaking at a central banking conference in Berlin, he recalled that the ECB had expressed worries about the weakening of the Stability and Growth Pact, which seeks to limit the budget deficits of EU member states.

“I am sending this message, as solemnly today as in 2005 when I expressed, on behalf of the (ECB) Governing Council, those grave concerns that I just quoted,” Mr Trichet said.

“In the past days, taking into account the lessons of the global crisis, in particular as regards its impact on the European single market and in the single currency area, we have called, and are still calling, for a quantum leap of governance.”

Mr Honohan said that while he expected the talks between the experts and officials to lead to a loan offer, he was not concerned about its effect on a country where many fear a full bailout would lead to a loss of sovereignty.

“I think this is the way forward,” he said. “I don’t see it as something that is really worrisome or should lead to a huge change in direction.”

Despite huge pressure, Ireland’s leaders have not committed to accepting an aid package in the face of concerns about how conditions attached to such a loan might affect issues such as its tax policy.

The Irish government is determined to safeguard its rate of 12.5-percent rate of corporation tax, one of the lowest in Europe.

It has allowed Ireland to attract business but is considered an unfair advantage by countries such as Germany.

Deputy Prime Minister Mary Coughlan told the Irish parliament the tax was “non-negotiable.”

In a rowdy session of parliament, Enda Kenny, leader of the main Fine Gael opposition party, attacked Prime Minister Brian Cowen’s coalition government, accusing it of indulging in “cronyism, sleeven (trickster) politics, dig outs, nod-and-wink, how is your father (and) buy them off.”