3 pm . While RTE reports only the Commission saying ” it isn’t us” The Irish Times reports that the pressure for a bailout is coming from the European Central Bank in order to ease pressure on Irish banks rather than the State directly..
European Central Bank vice president Vitor Constancio said Ireland could use the European Financial Stability Facility to help prop up its banking system to restore investor confidence.
“The problems of the Irish banking sector are not only problems of liquidity but also in some cases problems of capital, so losses,” Mr Constancio said at an event in Vienna today.
“For that purpose of course the EFSF would be adequate. According to the regulations of that facility, it cannot lend directly to banks. The facility lends to governments, but then the government of course may use the money for that purpose.”
The €440 billion European Financial Stability Facility was set up after Greece was forced to seek help in May.
“The Irish state is financed until part of next year, but it is also a problem of the banks that are at the centre of the problems in Ireland and considerations have to be pondered,” Mr Constancio said.
He added that while “there has been dialogue with European institutions … but so far no formal request”.
European Central Bank council member Miguel Angel Fernandez Ordonez also called on Ireland to make a “final decision” on its fiscal crisis to calm markets.
Has the Irish media been holding back until now on reporting the state of the financial crisis for patriotic reasons or just showing responsible caution? Given the feeding frenzy, it’s hard to tell. Perhaps the dam is now breaking.
Just before lunchtime RTE took the plunge and admitted that talks on a bailout were under way, while still running government denials. Michael Noonan of Fine Gael has just told the BBC he believes the bailout talks are true and the government is fighting a ” rear guard action.” Gavin Hewitt of the BBC reports that a united EU position has not emerged. If anything is clear, it is that the belief is hardening among EU nations particularly the eurozone that a bailout would be the lesser of two evils to stabilise the markets and the reduce the threat to the currency. This is now bigger than Ireland. Reuter’s gloss is that bailout talks are about rescuing the banks rather than bolstering the sovereign debt which doesn’t run out to next summer. What the essential difference is, is beyond me.
The immediate and biggest fear is a meltdown of the markets with nobody lending to Irish banks. Another fear is that the price of a bailout might be the forced abandonment of one of the biggest jewels in the crown – the 12.5% corporation tax rate. What an irony if NI as an enterprise zone were to enjoy a lower rate than the republic!
The Guardian reports that Irish crisis would affect the UK too in quite a big way
Under the terms of a deal agreed by Alistair Darling in May, the UK is liable for 13.6% of this fund. This means taxpayers could contribute as much as €8bn (£6.8bn), depending how the rescue package was structured.
The paper will be keeping a closer watch of Irish developments in a new Irish business blog.
It’s now hard to believe that the EU or the IMF can afford to wait for a few weeks until the Irish budget before making Dublin an offer it can’t refuse. Surely some clarity is vital at the latest by tomorrow’s meeting of EU Finance Ministers.