| 13.2°C Dublin

Taoiseach tries to play down 'possibility' of second bailout

TAOISEACH Enda Kenny yesterday attempted to play down the admission by a minister there was a "strong possibility" Ireland would need a second bailout.

Ahead of a meeting of EU leaders today in Brussels, Mr Kenny continued to insist the Government was on track to get back to borrowing from the international markets and emphasised the importance of a Yes vote.

His defence came after No campaigners jumped on European Affairs Minister Lucinda Creighton's admission there was a "strong possibility" a continuation of the bailout would be required.

Ms Creighton was warning about access to the emergency EU bailout fund if there is a No vote in the EU fiscal treaty referendum.

Socialist Party TD Clare Daly said if Ms Creighton had a problem with access to the European Stability Mechanism "they can veto its establishment".

European bank, BNP Paribas, said yesterday the present bailout should be extended by at least two years to the end of 2015. Such an extension "is likely and preferable", BNP said in the wake of Ms Creighton's comments.

An extended bailout could be done by rescheduling loans or agreeing some sort of deal on promissory notes, BNP said.

Extra cash to provide a cushion in 2014-2015 shouldn't be ruled out, the bank added.

Such an extension would be a "prudent approach" to protecting the State from market stresses generated elsewhere and would not be a "sign of Irish failure", the bank said.

BNP predicted the economy contracted again in the first quarter after contracting in the previous two quarters but calculates the economy began growing again in the current quarter.

Finance Minister Michael Noonan yesterday admitted he doesn't expect agreement on eurozone countries clubbing together to issue bonds at a meeting of EU leaders tonight.

Taoiseach Enda Kenny will attend the meeting in Brussels.

Mr Noonan's comments came as there are differing views being expressed across Europe on the contentious issue of eurobonds.

France will be pushing the proposal, but Germany remains negative towards the plan until there is greater fiscal discipline among eurozone countries.

Mr Noonan welcomed the proposal being on the agenda.

Before the EU leaders' dinner, Mr Kenny will be at a meeting of Fine Gael's European grouping, which will also be attended by German Chancellor Angela Merkel.

Meanwhile, the Paris-based think tank, the Organisation for Economic Co-operation and Development, warned that Ireland's economic recovery risked being derailed by the fallout from the eurozone debt crisis.

The economy would expand at an even slower pace this year than last, the OECD said in a gloomy report on the prospects for this country and our eurozone neighbours.

Gross domestic product is forecast to expand 0.6pc this year -- slightly less than the 0.7pc posted last year, it added.

The organisation said in November that the economy would expand 1.5pc this year, which means the new forecast is little more than one-third of the old one. Government and private consumption are seen falling along with investment by companies.

Irish Independent