Monday, November 29, 2010
Associated Press
BRUSSELS
European Union nations agreed to give 67.5 billion ($89.4 billion) in bailout loans to Ireland on Sunday to help it weather the cost of its massive banking crisis, and sketched out new rules for future emergencies in an effort to restore faith in the euro currency.
The rescue deal, approved by finance ministers at an emergency meeting in Brussels, means two of the eurozone’s 16 nations have come to depend on foreign help and underscores Europe’s struggle to contain its spreading debt crisis. The fear is that with Greece and Ireland shored up, speculative traders will target the bloc’s other weak fiscal links, such as Portugal.
In Dublin, Irish Prime Minister Brian Cowen said his country will take 10 billion immediately to boost the capital reserves of its state-backed banks, whose bad loans were picked up by the Irish government but have become too much to handle. Another 25 billion will remain in reserve, earmarked for the banks.
The rest of the loans will be used to cover Ireland’s deficits for the coming four years. EU chiefs also gave Ireland an extra year, until 2015, to reduce its annual deficits to 3 percent of GDP, the eurozone limit. The deficit stands at a modern European record of 32 percent because of the runaway costs of its bank-bailout program.
Cowen said the accord — reached after two weeks of tense negotiations in Brussels and Dublin to fathom the true depth of the country’s cash crisis — “provides Ireland with vital time and space to successfully and conclusively address the unprecedented problems that we’ve been dealing with since this global economic crisis began.”
However, in a surprise accounting move, European and IMF experts decided that Ireland first must run down its own cash stockpile and deploy its previously off-limits pension reserves in the bailout.