EU ministers prepare to seal Irish aid plan

27th November 2010, Comments 0 comments

EU finance ministers will meet in Brussels Sunday to wrap up an aid plan for debt-ravaged Ireland before markets reopen, a French source said as tens of thousands protested planned austerity measures in Dublin.

The source familiar with the issue said French Finance Minister Christine Lagarde had called for the meeting of her colleagues from eurozone countries, to be joined afterwards by ministers from the rest of the EU.

Originally it had been planned for them to communicate simply by telephone to approve the package worth 85 billion euros (113 billion dollars) and its conditions, the source added.

EU heavyweights Germany and France are urging a rapid conclusion to negotiations on the package, which will be accompanied by drastic Irish austerity measures, before markets open on Monday.

The International Monetary Fund is also involved in the rescue plan, which will be directed in part at Ireland's struggling banks and is intended to stop the debt crisis spreading to other eurozone nations.

In the Irish capital Saturday police said 50,000 people took to the streets to oppose the savage cutbacks needed to secure the bailout, while organisers put the turnout at thrice that figure.

The four-year package announced Wednesday by Prime Minister Brian Cowen will cut the minimum wage and slash 25,000 public sector jobs as the one time "Celtic Tiger" economy tries to pay off a huge budget deficit.

The plan also involves cuts to public sector pay, pensions and social welfare in a bid to save 15 billion euros by 2014 and has caused widespread anger in Ireland.

Media reports suggested Ireland might be charged 6.7 percent interest on the nine-year loans, significantly more than the 5.2 percent rate charged to fellow eurozone country Greece when it was bailed out earlier this year.

More restrictions are threatened in a budget expected to be brought in January to a parliament where Cowen only has a two-seat majority after his Fianna Fail party was defeated in a by-election on Thursday.

Cowen has refused to go to the polls until lawmakers have passed the budget, not likely before January, but opposition parties say he no longer has a mandate to govern.

German Economy Minister Rainer Bruederle, in an interview to be published in the Sunday newspaper Bild am Sonntag, said that while targets should be agreed it was up to Ireland how to meet them, including specific tax measures.

However, he added that EU loan guarantees would be tied to budget savings, better control of banks and increases in state revenue.

Portugal and Spain meanwhile are fighting to avoid having to follow Greece and Ireland in seeking international bailouts amid deep concerns on the financial markets.

Portugal's Prime Minister Jose Socrates insisted Friday his government was able to fund its needs on the bond market after parliament gave final backing to a hard-hitting 2011 budget.

And his Spanish counterpart Jose Luis Rodriguez Zapatero on Saturday said his government was ready to "accelerate" economic reforms if necessary.

Zapatero added that he would not "deviate from austerity", a day after he ruled out an Irish-style rescue for Spain and markets cranked the country's debt risk premium up to record highs.

The government's economic policy, he said, was based on austerity, restructuring the financial system and structural reforms which he intended to pursue "as quickly as possible" in order to be "more productive and increase competitiveness."

The prospect of a costly rescue for Spain's economy, which is twice the size of that of Ireland, Greece and Portugal combined, has prompted widespread concern.

Investors are demanding increasingly high rates in return for taking the risk of buying Spanish debt, adding to the problems faced by Madrid in raising fresh cash.

© 2010 AFP

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