Irish economic woes grow as Europe weighs bailout
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LONDON -- Ireland's prime minister acknowledged Tuesday that the country has been all but shut out from further borrowing on world bond markets, as European leaders continued crisis talks over a possible rescue for the heavily indebted nation.
"The cost of money is simply too high. We have to find further initiatives," Irish Prime Minister Brian Cowen told the Parliament in Dublin, opening the door for the first time on a possible international bailout.
European leaders met Tuesday in Brussels to discuss a resurgent crisis over European government debt, with both Ireland and Portugal being pressed to detail how they plan to trim massive deficits. Both are seen as potentially in need of help from a European bailout program and the International Monetary Fund, though neither have asked for help and are reluctant to do so.
The Irish, who view an international bailout as a potentially humiliating act that would rob the nation of its financial independence, are particularly being pressured to accept a deal. One option, a European official said, would be an agreement for about $100 billion, which would serve to both recapitalize Ireland's banks -- now buckling under weight of a dramatic real estate crash -- as well as provide the government with extra cash. Another would see Ireland seeking funds only to prop up its banking system.
But a deal may take days, or weeks, to put together and is still contingent on Ireland asking for help. Unlike Greece, which was facing a possible default on its debts when it asked for help in the spring, Ireland has enough funds to run the government through middle of next year.
But European officials are concerned that allowing the situation to fester until then would undermine how investors view the larger, more important economies of Spain and Italy, which are also weak and heavily indebted. Portugal, a cash-strapped but tiny economy already under pressure from investors, may need more immediate aid to avoid a financial crisis.
First Published November 17, 2010 12:00 am