Ireland finally asks Europe for a financial bailout, after weeks of speculation – but the strings which might be attached to the “momentous” deal are not yet clear, as Faisal Islam explains.
European finance ministers, the International Monetary Fund and Ireland were in the process of agreeing the Ireland bailout terms on Sunday night, but the broad structure has been signed off.
Irish Prime Minister Brian Cowen said:”The European authorities have agreed to our request. A formal process of negotiation will now commence that will lead to the provision of assistance on the basis of programme to be negotiated by the government with the European Commission and the International Monetary Fund in liaison with the European Central Bank.
“I expect that agreement to be finalised shortly, within the next few weeks.”
The unprecedented bailout is considered a humiliation for Ireland, once the poster boy of the eurozone economies.
But Finance Minister Brian Lenihan insisted Ireland had not been forced into making the plea for help – suggesting instead the loan was “firepower” that may not even necessarily be drawn down.
Experts estimated up to 70bn euros could be necessary to bail out Ireland and its stricken nationalised banking sector.
Mr Lenihan declined to comment over how much money Ireland may need, but did say that the country’s treasured 12.5 per cent corporation tax rate was “not on the agenda” as part of the bail-out – although its high 8.65 euro minimum wage could be.
The Irish cabinet met on Sunday afternoon for an emergency meeting to sign off the loan application. Formal talks hammering out the details and terms of the loan could take weeks.
After days of doubletalk, denial and spin, the Irish government has finally succumbed to what appears to have been forced medicine, writes Channel 4 News Economics Editor Faisal Islam.
Ireland's Sunday lunches were interrupted by the news that no sovereign financial minister wants to have to deliver to his people: the nation cannot afford its likely expenditure, foreign rescue required.
Read more from Faisal Islam: Ireland succumbs to bail-out
Up to 7bn euros could come from the UK, which will play a role in the rescue bid for the Irish economy.
A spokesman for the UK Treasury said today: “The Irish Finance Minister has indicated that his Government is likely make a formal request for assistance. As the Chancellor said last week, it is in Britain’s national interest that the Irish economy is successful and its banking system is stable, so Britain stands ready to support Ireland in the steps that it needs to take to bring about that stability.
“The UK will be closely involved in discussions on the scale and type of assistance as they develop.”
Mr Lenihan told RTE that the bailout package would also see changes in how the Irish banking sector worked. Since the property and banking crash in 2008 which led to a number of its banks being nationalised, Ireland’s risky bank strategy has come under fierce scrutiny.
So, Ireland is applying for an IMF loan, economic analyst Dr Peter Stafford writes for Channel 4 News.
It was perhaps the worst-kept secret in European economics, but unbelievably only confirmed by the Irish government on Sunday lunchtime in a hastily prepared radio interview by Brian Lenihan...
Read more on the Ireland bail-out: worst kept secret confirmed by Dr Peter Stafford
Mr Lenihan said the majority of the money would cover the Government deficit for the next few years, while the money assigned to propping up the banks would only be what he called a “demonstration of firepower”, which would only be drawn down when needed.
Conservative MP John Redwood told Channel 4 News his concerns over the role of the UK in any bailout.
The announcement marks a change in direction from the Irish administration, which has been insisting the country did not need help for at least a week – leaving the public feeling they have been lied to.
On Tuesday this week, Irish Premier Brian Cowen said he had not asked the EU for financial help.
However Mr Lenihan told RTE he had not misled the country over the last week and neither had his cabinet colleagues.
Read all the Channel 4 News reports on the Ireland bailout
The front pages of Irish newspapers today blasted the Irish administration, particularly Taoiseach Brian Cowen. The Irish Independent front page screamed: “A nation’s outrage to drive Cowen out”.
Along with the humiliating bail-out, Ireland also faces the announcement on Tuesday of the Government’s four-year plan to cut 15bn euros off Government spending, followed in December by an “austerity” budget.
Yesterday Channel 4 News spoke to Irish graduates, forced to leave Ireland to look for work as Ireland awaited economic rescue.
They spoke of their anger over the secrecy surrounding their country’s financial situation.
Shane Fitzwilliam said: “There is quite a lot of anger about the bailout. We don’t feel like we have been told the truth – this week is the first week we have been getting a clear picture of how bad it is.”