Ireland gives thumbs down to EU bailout

EU ministers continue to worry that Ireland's debt crisis will drag down financial markets. Ireland says its debts are covered until mid-2011.

Maxwells/PA Wire/AP
Irish Prime Minister Brian Cowen (l.) and European commissioner for economic and financial affairs Olli Rehn meet at Government Buildings, in Dublin on Nov. 9.

Irish Prime Minister Brian Cowen insisted this evening that his country's finances are not in crisis and that Ireland does not need a bailout from the European Union or the International Monetary Fund.

But EU finance ministers, who held a meeting with Irish officials today in Brussels, are continuing to add pressure on Ireland to accept financial assistance in order to ease its debt crisis and growing worries over Europe's financial markets.

Cowen made a statement in Ireland’s parliament today insisting the government’s debt were “fully funded” until mid-2011 and that measures taken to control public finances were working. Cowen spoke as the country’s finance minister, Brian Lenihan, met with EU counterparts.

RELATED: A reeling bond market has EU members pushing for Ireland bailout

EU authorities, desperate to stop Ireland's debt crisis from spreading to Spain and potentially destroying the euro currency, have been expressing frustration with Ireland’s refusal to accept an aid package.

Prior to today's meeting, an EU diplomat told the German Press Agency [DPA] that Mr. Lenihan had informed European colleagues he had no mandate to negotiate a bailout deal.

Despite this it appears the EU is still pushing Ireland to accept help. Following the meeting, Luxembourgish lawmaker Jean-Claude Juncker, who leads the group of eurozone finance ministers, welcomed the fact that the Irish government would still consider future aid. "We confirm that we will take action to safeguard the financial stability of the euro if that is needed."

Olli Rehn, Finnish politician and European commissioner for economic and financial affairs, said there's some level of confidence that the Irish government's four-year financial restructuring plan and front-loading of financial cuts are enough to see the country through its current problems.

Speculation about a possible bailout has reached fever pitch in Ireland but public pinion is divided as to whether a bailout would be a positive move for the country.

Adam Maguire, a Dublin-based technology writer, says he has grave doubts about any aid package. “I have concerns over sovereignty issues and the effect it would have over the likes of corporation tax."

Ireland’s corporation tax rate of 12.5 per cent is the third lowest in the EU and has been a key factor in attracting investment. It has already been flagged as a concern for other EU member states.

Arriving in Dublin last week, Mr. Rehn, was quick to highlight the issue, saying, "It's difficult to imagine Ireland remaining a low-taxation country.”

Others, however, see the bailout as an opportunity to punish politicians for the recession.

"I'd be happy with a bailout if they jail the bankers and politicians, basically,” says Emeline Callan, a small business owner from county Mullingar in the heartland of Ireland.

Claims emerged this evening that Ireland was using the parlous state of its national finances to bully other EU states into doing what it wanted. Britain’s Daily Telegraph suggested Ireland was “holding the eurozone to ransom” in order to get a better deal.

Dublin-based economist Constantin Gurdgiev, however, says such an idea is fanciful. “There are lots of conspiracy theories but I think what’s happening is the government is buying time, trying to work out what its best option is,” he says.

Dr. Gurdgiev, who favors debt restructuring instead of a bailout, says that accepting any bailout will result in the government finding its planned austerity measures harder to implement.

“The backbenchers and social partners such as trade unions don’t want the cuts. A bailout will make it harder to push tough measures through," he says.

New York-based economics commentator Doug Henwood says any EU or IMF deal at this point would be premature. “The EU wants to put the screws to Ireland now but the country doesn’t need the money until mid-2011."

“You go to the IMF when you have no other choice. Ireland’s not at that point yet. For now it makes sense to resist – things could improve in a few months.”

In an ironic twist, as Lenihan was coming under pressure to accept EU aid, David Drumm, the former CEO of Anglo-Irish Bank was facing bankruptcy charges in a Boston court. The bank, which lent primarily into the property sector, is widely credited with precipitating, even causing, Ireland’s rapid decline.

The creditors include his former employer, which Mr. Drumm owes €8.5m ($11.5m).

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