by Paul Foy
Portugal and Spain have called on the Irish Government to accept financial help from the EU, as countries borrowing rates suffer as a result of the Irish crisis.
Irish Finance Minister, Brian Lenihan will discuss the crisis tomorrow with his European counterparts in Brussels, and the Spanish and Portuguese are hoping that Ireland will accept the aid to protect the rest of it’s Euro Zone partners. But the European commission today confirmed that Ireland has not applied to tap the 60 billion euro rescue fund.
This goes against claims made by Fine Gael, the main opposition party at the weekend, that the government had already applied to the EU for aid.
Fine Gael’s financial spokesman, Michael Noonan said: “I’m extremely concerned. I think the reports (of an imminent bailout) over the weekend are true … I think there is European intervention underway.”
Calls to request the bail out reached fever pitch this week, as interest on Ireland’s 10 year bonds reached 9%, although this has now subsided to 8.3%. The Bank Of Spain governor, Miguel Ángel Fernández Ordóñez, said he hoped that an “appropriate reaction” from Ireland would calm the markets further.
He later told reporters: “The situation in the markets has been negative due in some part to the lack of a decision by Ireland. It’s not up to me to make a decision on Ireland, it’s Ireland that should take the decision at the right moment.”
If Ireland where to tap the monetary fund, Britain could have to pay up to 7 billion, as the previous government signed an agreement the day before David Cameron was made Prime Minister, which makes Britain responsible for 13.6% of the 50 billion pound fund. This could fall directly to British tax payers, depending on how any deal were to be structured
The UK government declined to say how much an Irish rescue package could cost British taxpayers. “There has been no application (from the Irish government for emergency funding) and we won’t speculate on it,” said a spokesman for the Treasury this morning, but Prime Minister David Cameron said Ireland was a key trading partner and its stability was very much in the country’s interests:
“If you look at the Irish economy, Ireland is an enormously important trading partner with Britain. It’s a fact that we actually export more to Ireland than we do to Brazil, Russia, India and China combined,” he told parliament.
“Now, that is a rebuke to us, we’ve got to do better with those other countries. But Ireland is an extremely important trading partner and stability in the Irish economy and success in the Irish economy is very much in Britain’s interest.”
Dublin is resisting pressure to ask for help because the bailout terms would be severe. Ireland would have to partially surrender sovereignty over its budget and could also be forced to increase its low corporation tax rate of 12.5%, a cornerstone for attracting foreign direct investment from major multinational corporations such as Dell.
The Irish Govt has funds the keep the country running until Summer 2011, which makes it unlikely that it is facing the same fate as Greece. It is probable that this time will be used to try and kick start the economy, starting with an upcoming budget in which savage cuts are expected across the board.