Fears of renewed EU debt crisis as Ireland refuses aid package

The Irish government, at a meeting of the euro group finance ministers in Brussels, resisted pressure from its EU partners and the European Commission to ask for funds from a 750 billion euro (nearly US 1 trillion) Financial Stability Facility, which was set up following the bailout of Greece in May to help euro zone nations facing liquidity crisis.
Several EU partners of Ireland and the European Commission have expressed concern that if the debt crisis in that country is not tackled speedily, it could spill over to other peripheral euro zone nations such as Portugal and Spain.

However, Ireland Finance Minister Brian Leinihan has repeatedly asserted his government's position that his country doesn't need a financial bailout from the EU.
"The Irish government is fully funded till the middle of next year," he told journalists in Brussels.

Earlier, on Tuesday, Irish Prime Minister Brian Cowen told Parliament in Dublin that his government is working with EU partners to deal with the debt crisis, but has not asked for bailout funds from the EU.

He also expressed the view that Ireland is well-funded until next year.Nevertheless, the finance ministers of the 16 nations that have adopted the euro as a common currency agreed to take "decisive and coordinated action to defend the stability of the euro zone," their chairman and Luxembourg Prime Minister Jean-Claude Juncker said at a news conference after the meeting.

"The euro rescue fund has more than 750 billion euros at its disposal and it is up to the Irish government to apply for assistance," he said.

EU Commissioner for Economic and Monetary Affairs Olli Rehn said the commission plans to keep a financial aid package for Ireland ready and it will be made available as soon as the country asks for assistance.The European Union, the International Monetary Fund (IMF) and the European Central Bank will send a team of experts to Dublin to prepare emergency assistance for Ireland, he said.

Confronted with a budget deficit of more than 30 per cent of the GDP, the highest among euro zone nations, and surging borrowing costs, the "Celtic Tiger" has no other choice, but to seek some sort of financial assistance from the EU, at least for supporting the banks, according to financial market analysts

Analysts said they expect Ireland to make a formal request for EU financial assistance once a crucial by-election on November 25 is over.The Irish government's position has been that even though it is against a state bailout, it would welcome financial assistance to support its banks.

But while the Irish government is reported to be willing to seek EU funding for its banks, the EU says the euro zone rescue package is intended for member-nations facing bankruptcy and not for supporting banks.

The government accumulated massive debt by spending billions of euros to rescue banks, which were faced with bankruptcy following the collapse of the country's once booming property sector.

The Irish government's borrowing costs have gone up sharply in the past weeks, as investors have grown increasingly worried about its ability to service its debts.

In a repeat of the sequence of the events that preceded the bailout of Greece in May with a 110 billion euro rescue package from the euro zone nations and the IMF, the borrowing cost of other debt-laden nations such as Portugal and Spain also went up in the past weeks, raising fears of a contagion in the euro area.
Austrian Finance Minister Josef Proell called for speedy action to deal with the Irish debt crisis.

Past experience with the debt crisis in Greece "shows that waiting too long will be very costly", he said.The EU estimates that Irish banks have an additional requirement of up to 50 billion euros to tide over their property market losses and to stabilise the entire banking system.

At the outset of Tuesday's meeting, European Council President Herman Van Rompuy warned that the stability of the euro is now at stake."We all must work together to ensure the survival of the euro," he said."If the euro fails, the European Union also will fail," Rompuy said