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Ireland in talks amid eurozone warning on debt

15 November 2010, 22:44 CET
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(DUBLIN) - Ireland said Monday it was in contact with its international partners over its debt crisis but denied seeking a bailout as the EU warned that Dublin's woes were a concern for the whole euro area.

Brussels and Dublin both insisted there were no formal talks despite persistent reports that Ireland was facing pressure to ask for help from a special European Union fund set up after the Greek debt crisis six months ago.

But with fears also mounting over the public finances in Greece and Portugal, Ireland said for the first time that it was in contact with international partners over its problems.

"Ireland has not made an application for external support," enterprise and trade minister Batt O'Keefe said at the Irish embassy in London.

"The Irish exchequer has ample cash reserves and is fully funded through to the middle of 2011. In addition, Ireland has nearly 25 billion euros of assets in the sovereign-wealth-fund-style National Pensions Reserve Fund.

"Given what's going on in the markets, I think it's quite normal that there has been ongoing contact at official level with our international partners.

"It is true that the cost of servicing Ireland's national debt as a share of revenue is projected to rise to 16 percent in 2014, but this is substantially less than the interest burden of 26 percent that Ireland bore in the 1980s and is only back to mid-1990s levels."

On the eve of a meeting of euro finance ministers in Brussels, speculation has reached fever pitch over a possible rescue for Ireland running up to 90 billion euros (123 billion dollars).

Ireland has been desperate to avoid a bailout, with Prime Minister Brian Cowen's embattled government insisting it is a matter of sovereignty and planning more harsh austerity measures in the annual budget on December 7.

"We have to resolve our own problem," Minister for European Affairs Dick Roche told Newstalk radio.

He branded reports of Dublin asking for a bailout as "frankly wrong and grossly irresponsible."

The Irish Independent newspaper reported that the government was considering asking for money for Irish banks from the EU emergency fund to fend off a threatened bailout for the state.

Irish opposition finance spokesman Michael Noonan said the government had not briefed him on the situation but added that he believed media reports pointing to a bailout were true.

"I think there is European intervention under way ... I believe things will come to a head in the next 24 hours," he told BBC television.

The one-time "Celtic Tiger" economy is in deep trouble mainly due to the costs of dealing with a huge crisis in its banking system, which in turn was the result of its banks' massive over-exposure to a busted property market.

The European Commission said it was in "close contact" with Dublin but the discussions stopped short of being talks on assistance, adding that it was an "exaggeration" to suggest there were pressures on Ireland from within the EU.

The crisis has sent the Irish 10-year bond yields shooting through the roof but they stabilised at 7.839 percent on Monday, having hit 8.949 percent last week -- the highest level since the creation of the European single currency in 1999.

Portugal said on Monday that Ireland needed to consider the needs of the eurozone as a whole.

Irish public deficit this year is set to be slightly more than 30 percent of gross domestic product -- 10 times the EU limit and more than three times the massive Greek deficit for 2010.

British and Irish media said there were official talks late on Sunday involving officials from Ireland, Germany, the International Monetary Fund, the European Commission and the European Central Bank.

The pattern resembles the build-up in the spring to the 110-billion-euro (150-billion-dollar) EU-IMF rescue of Greece.

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