International financial experts and Irish officials were locked in negotiations yesterday on a possible bailout for the debt-ridden economy at the heart of fears about the future of the eurozone.
Reports said the talks focused on shoring up Ireland’s crisis-hit banks, kept afloat up to now with billions of euros from the government at the cost of straining the public finances to breaking point.
The mission from the European Union, the European Central Bank and the International Monetary Fund will subject Ireland’s books to forensic analysis, looking at the reasons for the collapse of the one-time ‘Celtic Tiger’ economy.
Prime Minister Brian Cowen said the talks were “going well in terms of being open and constructive.”.
The government was conducting the negotiations “in a way for which the best outcome for Ireland can be achieved,” he added.
The government is determined that any deal will not require compromise on Ireland’s long-cherished 12.5-per cent rate of corporate tax.
The tax has helped to encourage companies to re-locate to the republic but EU heavyweights such as Germany claim the low level gives Ireland an unfair advantage and are expected to demand the rate be raised as part of any deal.
Enterprise Minister Batt O’Keeffe said the issue was “an aspect of taxation on which the government is not for turning.”
One EU diplomat said: “I cannot see the Irish giving in on this point.”
The Irish press focused on fears that a bailout that would lead to a loss of sovereignty for this country of 4.5 million people.
The Irish Daily Mail said it was about to be “humiliated,” while the Irish Times said the nation’s destiny was no longer in its own hands as the EU pushed one of the smaller members of the 16-country eurozone to accept support.
The “potentially enormous decisions” to be taken in the days ahead would have effects that will be “felt far into the future”, the newspaper said.
Some analysts said the talks could produce an agreement by Monday.
The governor of the Irish Central Bank, Patrick Honohan, said Thursday a “very substantial” loan of “tens of billions” of euros was on the cards.
The Irish Times claimed Ireland was negotiating from a stronger position than its fellow eurozone member Greece, which required an emergency bailout earlier this year.
“Normally, governments receiving external aid in bailout situations face empty coffers and are desperate for funding sources of any kind,” it said.
“The Irish state is not in that position because €20 billion is on hand owing to earlier borrowings. This provides more leverage than rescued countries can usually deploy.”
Mr Cowen, opening a new terminal at Dublin airport, insisted the government intended to go ahead with publishing a four-year austerity plan early next week, with a budget expected to follow on December 7.
The enormous debt burden weighing on Ireland, as well as on Portugal, has raised fears in European financial circles that the future of the European single currency could be at stake.
Analysts from Citi bank said the talks could be completed quicker than expected.
“Although the IMF spokesman highlighted (Thursday) that there would be no agreement before next week, we expect quick results of the talks, maybe as early as by Monday morning,” Citi said in a statement.
With Mr Cowen’s government clinging on to a narrow parliamentary majority and facing a by-election next week, the leader of the opposition Sinn Fein, Caoimhghin O Caolain, said the intervention of the IMF was “a disaster”.
“An EU/IMF bailout will not be a bailout for the Irish people. It will be a further bailout for the banks but the Irish people will have to pay the price,” he said.