Ireland formally accepted the need for a bailout, requesting help from the European Union (EU) and International Monetary Fund (IMF) on Sunday, according to Reuters. Irish Prime Minister Brian Cowen said, “The European authorities have agreed to our request. I expect that agreement to be finalized shortly, within the next few weeks.” The request was made under the European Financial Stability Facility (EFSF).
While the size of the package is not yet decided, it is expected to be between 80-90 billion euros, a smaller amount than the 110-billion-euro package Greece received in April. Britain will contribute about 7 billion pounds, even though it is not part of the euro zone.
Olli Rehn, economic and monetary affairs commissioner, said that EU, European Central Bank (ECB)and IMF experts would develop a three-year package of loans by the end of November. “Providing assistance to Ireland is warranted to safeguard the financial stability in Europe,” he said. “The program under preparation will address both the fiscal challenges of the Irish economy and the potential future capital needs of the banking sector in a decisive manner.”
Brian Lenihan, Irish finance minister, said that Ireland’s banks would likely be restructured. However, he insisted that the low corporate tax that has been so much a bone of contention would remain untouched. In a news conference, Lenihan said that in the end the banks would likely be significantly smaller, and might sell non-core assets as well.
EU finance ministers issued a statement in the wake of the request that said in part: “Ministers welcome the request of the Irish Government for financial assistance from the European Union and euro-area Member States. Ministers concur with the Commission and the ECB that providing assistance to Ireland is warranted to safeguard financial stability in the EU and in the euro area.”
Portugal is thought to be the next country in line for financial assistance. A Saturday report from Reuters indicated that Jose Socrates, prime minister of the troubled nation, might replace a number of officials within the government. However, there was speculation that he might find it difficult to replace Fernando Teixeira dos Santos, the country’s finance minister, in the midst of its crisis.