Government has no plan to ask for cash from EU fund
Published 09/09/2010 | 05:00
IN Brussels this week, Finance Minister Brian Lenihan insisted that he and his counterparts had not even discussed the possibility of Ireland begging for help from the €750bn EU stabilisation fund.
The fund was set up in April to help countries unable to tap the international bond markets.
"We have not [asked about external help] because the markets have remained open to Ireland throughout the economic crisis," Mr Lenihan said, on the day that the cost of borrowing rose to new highs.
So what would Mr Lenihan need to do under EU rules if he suddenly had a change of heart? The answer would be a very public, official request for help.
The fund requires governments to ask for money (as Greece did in April) and the request must get backing from the other 15 eurozone members, as well as the International Monetary Fund (IMF), which is putting up some of the money.
A three-year loan would be made at 5pc, or five times the European Central Bank's key interest rate, but less than the yield on Irish bonds at present.
While such loans would prevent Ireland from any possible default, most economists believe they are no more than 'sticking plasters' and do little, if anything, to solve the underlying problems.
Because such aid is coordinated by the EU and the IMF, the Washington-based fund would send officials to Dublin to monitor how it was spent.
The EU/IMF package also offers help through a €440bn special-purpose vehicle that can raise money on financial markets to buy the debt of fragile eurozone states. Such transactions, allowed under the €750bn rescue fund, offer a more discreet method of helping countries in trouble.
It was reported last month that, privately, European central banks bought Irish government bonds to give the Government some breathing space.