Lenihan confirms Ireland bail-out application

As the BBC reports, the Irish Minister for Finance, Brian Lenihan, has confirmed to RTÉ that, at the cabinet meeting today, he will propose an application be made for a financial rescue package from the EU, the International Monetary Fund and the European Central Bank.

From the RTÉ report

The Minister confirmed that discussions with the agencies had concluded yesterday evening.

Ireland would now be formally applying for a rescue programme and formal negotiations will begin.

He confirmed that the amount of money involved amounted to ‘tens of billions’ of euros but denied suggestions it would be as much as €70 or €80 billion.

He suggested most of the money would be used to cover the Government deficit for the next few years, while most of the money assigned to the banks would be from what he called a ‘demonstration of firepower’ that would only be drawn down if required.

Mr Lenihan added that there would have to be structural changes to the Irish banking sector as part of a ‘detailed resolution scheme’.

The BBC report adds

The Sunday Times speculated that the Republic’s bail-out package would be worth up to 120bn euros.

This compares with the 110bn euros Greece is set to receive over three years.

However, Mr Lenihan said the total would “not be three figures”.

He added that the “bulk of the money” would be “a contingency fund which stands behind the banking system” and said that any money borrowed would be at far lower rates than the country could get on the money markets.

The finance minister added that it would not be a criteria of the external assistance that it raised the country’s low corporation tax rate, which stands at 12.5% – much lower than the EU average.

Not a criteria?  Perhaps an added extra…

Update  The FT reports [free reg may be req] that eurozone finance ministers have approved the request in a conference call and that

An official said the precise size of the package would not be disclosed, unless eurozone ministers insisted on doing so.  Further, he added that the exact scale of the package would not be known until the experts in Dublin probing the accounts of the banks had finished their work, which he suggested could take “a number of weeks”.

And the FT also notes

Speaking on Irish radio [Brian Lenihan] declined to dosclose the interest rate the country would have to pay on any EU-IMF loans, but said it would be “a lot less than what we have to borrow at if we went to the world markets”.

Updated RTÉ report and Irish government statement

The Government today agreed to request financial support from the European Union and the Euro Area Members States. The IMF will also be requested to assist in the provision of support.

The Government welcomes the agreement reached at the Eurogroup meeting today that providing assistance to Ireland is warranted to safeguard financial stability in the EU and in the Euro Area.

In the context of a joint programme EU/IMF, the financial assistance package to the Irish state should be financed from the European financial stabilisation mechanism (EFSM) and the European financial stability facility (EFSF), possibly supplemented by bilateral loans to be negotiated by EU Member States. [added emphasis]

EU and euro-area financial support will be provided under a strong policy programme which will be negotiated with the Irish authorities by the Commission and the IMF, in liaison with the ECB.