EUROZONE FINANCE ministers backed moves last night to intensify “short and focused” preparations for an EU/IMF rescue plan for Ireland.
The development marks a clear change of course for the Government, which has been denying talks and insisting that there is no need for any external intervention.
Minister for Finance Brian Lenihan said it was not inevitable that Ireland would enter an EU/IMF programme. He said he was not going to determine a deadline for the talks, which step up in Dublin later this week, but said they were “urgent”.
He declined to quantify the likely scale of any intervention and would not say what would happen at the end of the talks.
“Clearly it’s important that those who wish to help us and those that wish to work with us should find out all the facts on the ground in Dublin and that will be arranged for them,” Mr Lenihan told reporters late last night in Brussels.
“There’s no decision and the Government did not commit to enter a facility but there are serious market disturbances. They jeopardise not just Ireland, they threaten the euro zone, so it is essential that we address those structural problems and that we deal with them.”
EU economics commissioner Olli Rehn said the talks would centre in the main on a package to stabilise Ireland’s banks and said it would be available if the Government choose to seek aid.
“This can be regarded as an intensification of preparations for a potential programme in case it is requested and deemed necessary,” Mr Rehn said. “This is a time for cool heads and clear determination to take the necessary decisions to that effect both at the EU level and in every member state.”
The move follows a serious decline in bank share prices and a rapid escalation in the Government’s borrowing costs. Mr Lenihan expressed the hope, however, that the moves will foster confidence in the Government’s plan. The priority remained the 2011 budget and the four-year plan, he added.
The decision to proceed with preparations for an EU/IMF plan for Ireland was taken during a three-hour meeting at which Mr Lenihan said he had no mandate from the Government to negotiate a bailout.
It comes against the backdrop of mounting anxiety in the European Central Bank (ECB) that the banks’ increasing reliance on exceptional support and concern that the €45 billion bailout bill might have to increase.
“The ECB has stood loyally behind the Irish banking system and continues to do so. Those who have deposits or funds in the Irish banks can be quite secure as part of the eurozone that we are guaranteed the stability and support of the ECB,” Mr Lenihan said.
The terms of reference for the talks, read out last night by euro group president Jean-Claude Juncker, say engagement will determine the “best way” to provide any support required to address market risks especially in the banking sector.
“Market conditions have not normalised and pressures remain, giving rise to concerns that further reforms and stabilisation measures may be appropriate,” said Mr Juncker, who is Luxembourg’s prime minister.
Mr Juncker said he expected “within the coming days” a definitive decision on whether Ireland would seek a bailout.
Mr Lenihan, who arrived more than an hour late to the meeting due to fog, has been arguing that the Government can find a way of resolving the banking crisis without triggering a fiscal rescue.
Diplomatic and other sources say, however, that ECB chief Jean-Claude Trichet has been pressing for a decisive response to deterioration in the position of the Irish banks.
Mr Lenihan said that Ireland’s EU partners understood that corporate taxation is not under discussion. When asked if he had any concerns about a possible erosion of Irish sovereignty, the Minister said: “When you borrow, you lose a little bit of your sovereignty, no matter who you borrow from.”
He added that he saw sovereignty in a European context, given Ireland’s membership of the euro.
