Ireland asks for multi billion euro bailout

Irish Prime Minister Brian Cowen said late yesterday the European Union had agreed to Ireland’s request for a multi-billion euro bailout amid fears the debt-laden nation could spread contagion to weak euro economies.

“I can confirm that the government has made a request to the European Union and they have agreed,” Mr Cowen said at a press conference.

Finance Minister Brian Lenihan added that the exact amount of the bailout was still to be worked out.

Mr Cowen, however, said Ireland’s 12.5 per cent corporation tax would not be changed.

The Irish leader also said that Irish banks will have to be trimmed down.

“Stress testing (of Irish banking) will have to be undertaken to see if further capitalisitaion will be required,” he said.

EU finance ministers said yesterday the massive bailout aimed at cleaning up Ireland’s banking sector is “warranted” to protect Europe’s wider economy,

“Ministers concur with the (European) Commission and the ECB that providing assistance to Ireland is warranted to safeguard financial stability in the EU and in the euro area,” the European Union and Eurogroup of currency partners said in a statement.

Confirmation came after a series of conference calls gathering European partners and G7 counterparts from the US, Japan and Canada, amid pressure to plug a giant hole that has already seen the Irish government pump €50 billion into its failed banks. Aid negotiated with the International Monetary Fund “will also include a fund for potential future capital needs of the banking sector,” they said, highlighting “deleveraging and restructuring of the banking sector.”

The statement underlined that other non-euro EU nations, over and above Britain and Sweden, which have already offered bilateral assistance, could yet join the effort.

Belgian finance minister Didier Reynders said the bailout would fall somewhere short of €100 billion.

This is the eurozone’s second emergency bailout this year.

The breakthrough deal came after Ireland drew up its demands for the bailout package after four days of pressure-cooker talks in Dublin between the government of Prime Minister Brian Cowen and experts from EU institutions and the IMF.