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Ireland looks to banks for bailout

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by Kay Mitchell
Ireland looks to banks for bailout

There is speculation that Ireland is looking to its banks for emergency funding – the Irish Independent reported on Monday.

The report comes as Ireland’s Government continues to reject claims that it is seeking emergency financial support via the EU rescue fund – established by European Governments and the International Monetary Fund after the Greek debt crisis earlier this year.

There have been reports over the weekend that Irish officials have already held discussions with the European Financial Stability Fund with regard to a bailout of between €60bn (£51 billion) and €80 billion.

However, the claims have been denied and many have said that the Irish Government is fully funded until at least the middle of next year – meaning a liquidity crisis is not going to happen anytime soon.

It now appears, though, that the country’s Finance Minister, Brian Lenihan, is considering asking European counterparts, at a scheduled meeting in Brussels tomorrow, if it is possible to funnel funds into the Irish banking sector.

Ireland’s banking system came close to collapse after the slump in the country’s property market resulted in a fall in the value of investments linked to it.

Four of the country’s banks have now been nationalised and Mr Lenihan recently remarked that even more emergency finance could be required if Irish property prices fall further, and then fail to recover.

The former “Celtic Tiger” economy experienced a property boom in the late 1990s, with multinationals arriving to take advantage of one of the lowest corporate tax rates in the euro zone.

However, it has suffered the worst property slump of all developed economies, with property prices falling by more than 50%, in some cases.

It suffered one of the deepest recessions of its fellow euro zone nations and is also battling to bring its deficit down from 12% of economic output to 3% by 2014.

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News posted: November 15, 2010

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