19 Nov 2010

EU bail-out nears for Ireland

6:57 am on 19 November 2010

Irish Central Bank governor Patrick Honohan says he expects the Irish Republic to accept a "very substantial loan" as part of an EU-backed bail-out.

Mr Honohan told RTE radio he expected the loan to amount to "tens of billions" of euros.

The final decision will be up to the Irish government, which has said it has not agreed to a loan from Europe.

Ireland has said the bill for cleaning up its banks could top 50 billion euros but investors fear the final figure could be even higher.

A team of international officials is meeting in Dublin for further talks on the debt crisis.

Representatives from the International Monetary Fund, the European Central Bank and the EU will meet the Irish government, which says it has not even asked for aid.

Mr Honohan said that any loan would be substantial.

"It'll be a large loan because the purpose of the amount to be advanced or to be made available to be borrowed is to show that Ireland has sufficient firepower to deal with any concerns of the market. That's the purpose of it," he told RTE.

But when asked about those comments, Prime Minister Brian Cowen said that the governor was entitled to his view.

Mr Cowen said he did not want to "pre-judge" the outcome of the talks.

Big loss of face

The BBC reports an EU handout would be seen as a big loss of face for the Republic - essentially meaning that its survival and solvency were reliant on Brussels.

Fears about the stability of Irish banks has led to a rise in the price the Irish government - which has pumped billions into its banks - pays to borrow money.

Other eurozone countries that are also perceived as weak are seeing their borrowing costs rise too.

The Irish are concerned about the conditions attached to any bailout and the inevitable loss of some economic sovereignty, including higher corporate taxes and further cuts in public spending.