Ireland facing crisis talks with EU/IMF mission

17th November 2010, Comments 0 comments

Ireland faces financial crisis talks with a delegation from the European Commission, the European Central Bank and the International Monetary Fund on Thursday, as markets await news of a bailout.

The high-profile EU/IMF mission will seek an "intensive engagement" to try and stabilise the nation's deeply troubled banking sector, Finance Minister Brian Lenihan said Wednesday.

The delegation will kick off talks with the government amid domestic concern that any bailout could force it to ramp up Ireland's low corporate tax that had helped fuel its economic boom before the financial crisis erupted.

"What we have agreed to do is to look at the structural problems in the Irish banks in the light of recent market pressures and assess what needs to be done because banking questions are technical and difficult," Lenihan told RTE state radio.

"An intensive engagement will now take place which will ensure that we can stabilise our banking sector. The discussions will begin on Thursday."

Lenihan revealed the news after eurozone finance ministers met in Brussels to address the crisis, pledging on Tuesday to act in a "determined and coordinated" way to protect the stability of the single currency area.

Asked if there could be an outcome by the weekend, Lenihan said: "We haven't set deadlines on this but it is urgent and it will be focused."

Financial markets are on red alert over a possible bailout of Ireland, just six months after the EU/IMF rescued debt-riddled Greece with a commitments of 110 billion euros (148 billion dollars).

Speculation has swirled this week that the former Celtic Tiger nation could be bailed out to the tune of 90 billion euros.

"The bottom line is that we continue to expect an imminent deal to be reached," noted Royal Bank of Scotland analyst Nick Matthews.

But Irish Prime Minister Brian Cowen repeated that his was not seeking a bailout.

"What we want to concentrate on now is ... to sit down and see in what way can assistance be provided to ensure that these issues are dealt with properly and appropriately in present circumstances.

"There has been no question of the government, as was being stated all over the weekend, in negotiation for a bailout."

Ireland is heading for a public deficit this year of about 32.0 percent of national output. This is far higher than even Greece and well beyond the 3.0 percent limit stipulated by the European Union.

Lenihan added Wednesday that if action were needed on a European-wide basis it would be taken. "We have that full assurance," he said.

The ECB stood fully behind Ireland's banking system, while Ireland had no funding difficulties, he said.

Irish banks are already being supported by the European Central Bank through the ECB's bond purchasing program.

Meanwhile on Wednesday, Austria raised the sensitive question of demanding that Ireland increase its corporate tax in exchange for an international rescue over its financial distress.

Attending European Union talks in Brussels, Austria's Finance Minister Josef Proll said when asked whether, in case of a rescue, Ireland should be urged to raise the tax, which it has always refused to do: "We will also have to discuss this question with the Irish government."

Earlier, Lenihan told RTE that its corporate-friendly tax would not be affected by developments.

"Of course our corporation tax rate is safe because that is a matter that is safeguarded by the (EU) treaties themselves.

"It is not a matter which arises. It is something which is absolutely fundamental to our growth prospects in the years ahead."

Ireland's low corporate taxation, currently at 12.5 percent, has helped the nation attract substantial international investment.

Back in Brussels on Wednesday, British finance minister George Osborne said that Britain was looking at "a number of different avenues" to help Ireland's devastated banking sector.

"Britain's approach is this: we will do what we regard as being in Britain's national interest," Osborne told reporters on Wednesday during a meeting of EU finance ministers focusing on Ireland's woes.

"Ireland is our closest neighbour, it is the only country with which we share a land border," he said. "It is in our interest that Ireland's banking system is stable."

© 2010 AFP

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