Ireland in debt crisis talks with EU - Action News
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Ireland in debt crisis talks with EU

Officials of debt-burdened Ireland's government are in talks with other European Union governments about how to handle its troubled finances, but denied they needed a bailout from an EU rescue fund.

Government denies it needs a bailout

Officials of debt-burdened Ireland's government were in talks with other European Union governments Monday about how to handle its troubled finances, but denied they needed a bailout from an EU rescue fund.

Bond markets have been roiled in recent weeks by concerns of an eventual Irish default on its debt.

A headline shows the focus on currencies at a newspaper kiosk in Dublin Monday. Debt-burdened Ireland is talking with other European Union governments about how to handle its troubled finances. ((Peter Morrison/Associated Press))

The talks came a day ahead of a meeting of euro zone finance ministers in Brussels.

The financial troubles facing Greece, which has already received a financial rescue loan, will also be on the agenda after it had to revise its deficit figures upward yet again.

Fears ofpossible Irish insolvency are driving up the borrowing costs of other heavily indebted nations such as Greece, Spain and Portugal.

Analysts said investors needed the finance ministers in Brussels to offer a clear path forward for Ireland to reduce its deficit and bear the costs of its enormous bank bailout.

Irish officials insisted they had no need to seek help because they have enough cash to avoid new borrowing until mid-2011.

Still, speculation is mounting that other EU countries are pressing Ireland to stop the rout in bond markets by taking help from the euro zone's 750 million-euro financial backstop put together with the EU executive commission and the International Monetary Fund.

"We have no reason whatsoever why Ireland should seek external support. Ireland is well-funded," the country's minister for European affairs, Dick Roche, said in a telephone interview.

No bailout talks

When asked if Ireland hoped to tap EU funds to boost the liquidity of its troubled banks, as opposed to the government, Roche said that was a matter for the European Central Bank in Frankfurt, not the EU's emergency fund.

"There is no reason for us to trigger any mechanism," Roche said.

"There's been no political discussions about triggering any mechanism. We don't know how many times we have to say this, as a government, to stop all this inaccurate speculation."

A senior Irish opposition politician, Michael Noonan of the Fine Gael party, said he believed that other European governments were determined to intervene soon to contain Ireland's problems for the wider sake of euro zone stability.

'I believe that things will come to head in the next 24 hours.' Michael Noonan

"I think the Irish government are fighting a rear-guard action for appearances purposes, but ... I believe that things will come to head in the next 24 hours," Noonan said in reference to Tuesday's meeting of 16 euro-zone finance ministers and Wednesday's meeting of the ministers of all 27 EU members.

German Chancellor Angela Merkel in recent weeks has stressed her view that it's not right to make taxpayers, not bondholders, solely responsible for bailing out governments and banks.

The markets reacted by dumping the securities of the most vulnerable EU members, not just Ireland but also Greece and Portugal and to a lesser extent Italy and Spain.

EU nations slowed the selloff by clarifying that any default process would apply to debt issued after the current EU stability fund expires in 2013.

Ireland is struggling with a deficit that has ballooned this year to a staggering 32 per cent of GDP, a record for post-war Europe.

Much of that resulted from the government's 45 billion-euro takeover of five banks that ran into trouble following the 2008 collapse of the country's real estate boom.

The yield on Ireland's 10-year bonds fell Monday in expectation that other EU nations would intervene. It opened at 8.14 per cent and slid to eight per cent in afternoon trade.

High yields reflect weak market confidence in ability to pay.The yield peaked Thursday at a record 8.95 per cent.

With files from The Associated Press