Reuters: “Talks are ongoing and European Financial Stability Facility (EFSF) money will be used”

Despite the apparent ‘good news’ yesterday, it appears the pessimists may be right after all.  The BBC picks up on a Reuters report quoting “euro zone” sources

Euro zone sources told Reuters that aid discussions were under way, however. One official said it was “very likely” that Ireland would get financial assistance from the EU facility set up after Greece obtained a 110 billion euro bailout in May.

“Talks are ongoing and European Financial Stability Facility (EFSF) money will be used; there will be no haircuts or restructuring or anything of the kind,” one euro zone source said. A second source confirmed the talks.

According to the BBC version

The Republic of Ireland is in preliminary talks with EU officials for financial support, the BBC has learned.

It is now no longer a matter of whether but when the Irish government formally approaches the European Financial Stability Fund (EFSF) for a bailout.

Adds  RTÉ reported yesterday that the talks were on “a ‘what if’ basis”.

In particular, RTÉ News understands, the technical discussions have looked at the possibility of Ireland – should it need help – accessing funds only from the first component; the €60bn from EU funds.

Under Community Law the European Commission could borrow up to €60bn on the international market using its AAA rating.

It is understood that using this option might alleviate certain political and legal uncertainties which could arise if Ireland tapped the €440bn special purpose vehicle.

Update  In the comments zone Mack points to a comprehensive Bloomberg report

Ireland is being urged by European policy makers to take emergency aid to contain a debt crisis rattling their markets, according to a person briefed on the discussions.

In a conference call of European Central Bank officials around noon Frankfurt time yesterday, Ireland was pressed to seek outside help within days, the person said on condition of anonymity. Separately, a European Union official said a request for assistance was likely even as Irish Finance Minister Brian Lenihan told RTE Radio that such a call “makes no sense” as the government is fully funded to mid-2011.

Further update  And there’s this from the BBC business correspondent Joe Lynam

Unlike Greece last May, Ireland doesn’t need to ask the markets for money until next year. But bond traders are not convinced it can cut its deficit by enough by then and have pushed the cost of borrowing to unsustainable levels (8.3%).

Dublin had hoped that by slashing spending and raising taxes in the forthcoming budget on 7 December, it would show resolve and in doing so drive down the cost of borrowing on the bond markets. That hope is now dashed.

Now that talks have begun with Eurogroup officials, Ireland has the embarrassment of pressing ahead with day-to-day management of a country still officially Europe’s third richest – knowing that it will have to join an exclusive but not illustrious group of nations needing to go cap in hand to their fellow eurozone countries for a loan.

Adds  Interesting slant in the RTÉ sub-headline

The Department of Finance has denied foreign media reports that Ireland is involved in talks on an application for emergency funding from the European Union.

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