Bailout agreement nears for Ireland

November 28, 2010 at 12:00a.m.

Los Angeles Times

LONDON

Ireland is on the verge of reaching a preliminary agreement with international finance officials on a massive bailout package, a government minister said Saturday, as thousands of angry demonstrators marched through Dublin to protest the country’s latest round of painful public-spending cutbacks.

Irish Communications Minister Eamon Ryan told broadcaster RTE that his colleagues and their counterparts with the International Monetary Fund and the European Union were working hard to produce an “outline agreement” in time for the opening of financial markets Monday.

Dublin is deep in the hole because of its devastated banking sector, whose losses have pushed the government’s budget deficit to a staggering 32 percent of gross domestic product. Nervous investors have been dumping Irish bonds for days, making it prohibitively expensive for Ireland to borrow money on the open market.

In addition to jittery international markets, Dublin also must contend with an increasingly angry populace, including many who blame the government’s coziness with the banks for bringing Ireland to its knees and who reject the tough austerity measures it has introduced to rein in the deficit.

Under the latest austerity plan, unveiled last week by Prime Minister Brian Cowen’s government, thousands of public sector jobs will be eliminated, property and sales taxes will increase, welfare benefits and pensions will be cut, and the minimum wage will decrease.

“If Brian Cowen was a true leader, instead of cutting the minimum wage, he would have said, ‘I’m cutting my salary and all my ministers’ salaries in half,”’ said Sandra McLellan, 49, who braved heavy snow to travel to Saturday’s protest from her home in County Cork. “Cutting the minimum wage by a euro per hour will affect those at the bottom.”

Protest organizers chose a symbolic destination for their 15,000-strong march through Dublin: the city’s General Post Office, an icon of Ireland’s long struggle for independence from Britain. Critics lambaste the IMF and EU bailout as a shameful loss of sovereignty.

In fact, Fianna Fail, the party that has governed Ireland for nearly its entire history as a modern independent nation, is now on the rocks.

Communications Minister Ryan declined to give precise details of the expected bailout, beyond its projected price tag of about $115 billion. That amount is likely to shield Dublin from having to raise cash in the bond market for as along as three years. But observers are eagerly waiting to hear what conditions will be imposed on the government in return.

The announcement of even a draft agreement Sunday would represent a speedy outcome to negotiations that had been expected to take weeks.

In the last few days, however, concern about Ireland’s precarious finances began spreading to other troubled nations that use the euro, particularly Spain and Portugal, whose borrowing costs also have hit almost unsustainable highs.

Officials hope that a quick resolution for Ireland will soothe investor anxiety and stabilize the euro, which has dropped to its lowest level against the dollar in two months.