Barroso ‘monitoring crisis’ but no sign of Ireland seeking aid

EUROPEAN Commission president Jose Manuel Barroso said he is monitoring the Irish crisis on a daily basis, but officials say there has been no hint that Ireland is preparing to access the €750 billion bailout fund.

As the cost of Irish borrowing created a new record for the 13th day, Irish economists said there was no reason for the Government to seek a bailout.

But some said it could relieve pressure on the eurozone if Ireland sought money from the fund sooner rather than later.

Mr Barroso said, while they monitor the situation, “in case of need, the EU is ready to support Ireland. We have all the necessary instruments in place”.

What appears to be pushing speculators to sell off Irish debt was fear that Germany could insist creditors take a hit if a country defaulted and had to have its debts restructured on foot of being bailed out.

Finance Minister Brian Lenihan has acknowledged that these German comments are partly responsible for the huge surge in the cost of Irish debt and said he was seeking clarification from Germany.

However, at present, the special fund mechanism set up earlier this year and which will be available until mid-2013 does not require private investors to take a haircut, said Dr John FitzGerald of ESRI.

The fund, designed to help eurozone countries that were being charged interest rates they could not afford by the markets, is also to be accessed as a last resort but Ireland has €20 billion in reserve, enough to see it halfway through next year.

Thomas Conefrey, an economist with the ESRI, said it was unfortunate that the talk by the German finance minister and Chancellor Angela Merkel was having an impact on Ireland. “What is happening is being driven by little more than rumour.”

While the Irish banks continue to be hit by the markets, also making it almost impossible for them to raise funds there, the European Central Bank is continuing to provide them and many of the EU’s banks with cheap money.

Provided they continue this policy for as long as the high rates being charged on Irish sovereign debt and to banks continues, there is no immediate danger.

Nicolas Veron, of the Brussels-based economic think tank Bruegel, asked if Ireland should consider seeking a bailout before it became essential, said.