Ireland not making an application for EU or IMF funding for the State, according to Taoiseach Brian Cowen. He said last night an application was not being made because the country was already funded right up to the middle of next year.
Mr Cowen accepted that the cost of money for Ireland on the bond markets was high but the issue would be discussed by Brian Lenihan and the other EU finance ministers at their meeting in Brussels today.
“I have a job to do which is to ensure we do the right thing by the country,” said Mr Cowen, who added that Ireland would sit down with its EU partners and discuss “how we underpin banking and financial stability in the medium and long term.”
The Taoiseach said that if the current turbulent market conditions were to become the norm they would cause a lot of problems for people in a number of countries where budget deficits had to be reduced and funds provided for state services.
“In a context where there is a lot of turbulence and worry and concern, I am just making the point that we will calmly and in a considered way deal with these issues in the days and weeks and months ahead,” the Taoiseach said in an interview on RTÉ television.
Although the European authorities in Brussels sought to play down expectations that the Government would soon apply for aid under the EU/IMF rescue scheme, public remarks from the top level of the European Central Bank (ECB) indicated that a move to bolster Ireland’s banks is under discussion. Talks seeking a common position on how this could be done will continue today ahead of the finance ministers’ meeting, with Department of Finance sources saying last night it was too early to predict the outcome.
In Vienna yesterday, ECB vice-president Vitor Constancio said the Government would be able to use the emergency fund for euro governments to recapitalise banks. However, senior Dublin sources played down the prospect of any early step in that direction.
Mr Constancio said: 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.
He said the problems of the Irish banking sector “are not only problems of liquidity but also in some cases problems of capital”. Even though the EU rescue fund can’t lend directly to banks, he said Dublin can “use the money for that purpose”.
The yield on Irish Government debt – the price charged by the markets to lend to Ireland – will also be watched ahead of the meeting. Irish yields fell yesterday, indicative of greater market confidence in Ireland.
After relative calm on the markets yesterday, informed sources said EU leaders were working on the basis that Ireland should be given every opportunity to proceed with the four-year plan and the budget.
They said, however, that the situation remained volatile given the risk that market tension might again erupt.
Euro group chief Jean-Claude Juncker tried to damp down pressure on the Government ahead of the finance ministers’ meeting tonight, saying the Irish authorities were ‘‘not near the point where they would ask for external help”. The commission dismissed reports of bailout talks as an “exaggeration” and the spokesman for economics commissioner Olli Rehn declined to discuss the questions that might be raised in any intervention to assist the banks.
‘‘The presentation of this four-year plan . . . can only reinforce that confidence in the Irish economy and on the fiscal sustainability,” he said.
With Ireland’s difficult position the main talking point in Brussels, well-placed sources acknowledged that some around the commission table have doubts about the capacity of the Irish State to assume on its own the entire burden of the banking bailout.
Sources acknowledged that certain high-level commission officials have doubts about the growth forecasts in the 2011 budget and the early years of the four-year plan. The sources emphasised, however, that this was not the position of the commission itself or the principal figures involved in discussions on Ireland.
Responding to the Taoiseach last night Fine Gael Finance spokesman Michael Noonan said Mr Cowen needed “to speak plainly and not speak in riddles.” Mr Noonan said that it would be better if a bailout could be avoided. “Certainly we think it’s a much better national position to control our own affairs. Our sovereignty was got at a price. We should not give it away lightly.”
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