BRUSSELS (AP) — European Union finance ministers worked Sunday to complete a proposed euro85 billion ($113 billion) emergency loan for Ireland, a two-week effort designed to prevent the spread of bankruptcy risks to other nations of the eurozone.
Irish officials in Dublin say the EU ministers arriving in Brussels for a hastily called meeting are poring over a series of documents spelling out proposed terms and conditions for loans from across the globe, but chiefly from Ireland’s debt-burdened European partners.
The European Central Bank earlier this month forced Ireland’s hand into accepting a bailout as it became critically clear that several state-backed banks in Dublin were struggling to raise funds and were instead relying on euro130 billion in short-term loans supplied or approved by the Frankfurt bank.
All sides in the Brussels talks said they hoped to announce at least an outline loan agreement before markets open Monday. In the mix were bilateral loan offers from Britain, Sweden and Denmark, which are not members of the euro currency but have major business interests in Ireland.
While many EU finance ministers were already gathered around the same table in Brussels, aides to Irish Finance Minister Brian Lenihan said he was still en route to the EU capital because of delays caused by exceptional snowfall in Dublin.
“We’re nearly there, we’ve made great progress in the talks in Dublin in recent weeks, but there can’t be an agreement until it’s signed off and approved at political level,” said an Irish government official, speaking on condition of anonymity because he was not authorized to talk on the record about this month’s Dublin negotiations.
Most Irish people and many economists say the emerging loan package should include requirements that foreign banks that loaned hundreds of billions to Irish banks should share the cost of the Irish bailout.
But until now, the Irish government and European Commission have been unanimous in ruling out any partial defaults on Irish bank debts, arguing this would cause unpredictable shockwaves in global banking. The major lenders to Ireland’s debt-crippled banks are from Britain, Germany and the United States.
European chiefs have expressed hopes that an Irish financial rescue, regardless of its terms, will restore faith in the ability of the 16-nation eurozone to prevent defaults among its members. They face challenges from global investors, who have been dumping the bonds and bills of several eurozone members — chiefly Greece, Ireland, Portugal and Spain — in the belief that all are on course for eventual defaults or more bailouts.
Irish officials have disputed reports that at least part of the bailout would come with an interest rate of 6.7 percent. They have said it will be nearer the 5.2 percent average being paid by Greece for its euro110 billion ($150 billion) EU-IMF bailout in May.
Ireland was long the EU’s economic star, but the Celtic Tiger suffered a spectacular fall in 2008 when its construction-dependent growth amid a global credit crisis and burst property bubble. Unemployment has nearly tripled to 13.6 percent, second only to Spain in Europe, and tax revenues have plummeted.
Those offering bailout funds expect Ireland to take drastic action to reduce its Europe-leading deficit. The Irish government this year is spending more than euro50 billion but expected to collect just euro31 billion, while exceptional costs from a euro45 billion bank-bailout program have inflated Ireland’s deficit to 32 percent of GDP, a post-war European record.
To combat this, Ireland has already imposed three emergency budgets and plans to unveil a fourth Dec. 7 that would cut euro4.5 billion in spending and raise euro1.5 billion in new taxes. Prime Minister Brian Cowen has only a two-vote majority in parliament and faces a series of tough votes that, if he loses one, could force the government to collapse.
On Saturday, more than 15,000 people marched in Dublin to denounce the imminent bailout as likely to give Ireland, a nation of 4.5 million, a bill it can never repay.
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Pogatchnik contributed to this report from Dublin.
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