We won't fall into bailout trap -- Lenihan

Kevin Doyle

IRELAND will not fall into the trap of seeking an EU bailout, Finance Minister Brian Lenihan has insisted.

In an attempt to win back the confidence of financial markets, Mr Lenihan also claimed that repaying all Irish debt was a "cardinal plank" of Government policy.

Mr Lenihan appeared on BBC last night in the hope that international markets would take notice of his message -- and not assume that EU Commissioner Olli Rehn's visit to Dublin was the beginning of a bailout.

He denied that Ireland had lost its sovereignty and claimed that, despite massive interest rates on international bonds, we would be able to return to the markets next year.

As Taoiseach Brian Cowen told the Dail that the country would run out of cash unless the Budget was passed, Mr Lenihan appeared to blame Germany for causing bond rates to soar above 8pc.

Experts say that if rates do not drop significantly in early 2011 a bailout will be inevitable, but the Finance Minister insisted that Ireland would return to the markets next year and intended to fund itself.

He charged: "There has been a dramatic increase in bond spreads in Ireland in recent weeks.

"It's entirely caused by the fact that doubt has been cast in certain European statements about whether peripheral EU states will be allowed to repay their sovereign debts."

The statement appeared to be an attack on German Chancellor Angela Merkel who has been suggesting that struggling countries need to forego some of their debt. But Mr Lenihan said: "We've made it a cardinal plank of our policy that we intend to pay our debt. We will pay our way and we are determined to do that."

The Finance Minister agreed to the interview with Jeremy Paxman on BBC's flagship current affairs programme Newsnight despite his office lodging a complaint following a previous appearance last year.