Proclamation of Dependence

BRIAN LENIHAN last night admitted Ireland would need an EU-IMF bailout after the Government spent the best part of a week firmly downplaying the possibility.

“We have to address the problems in our banking sector, we can’t function without a functioning banking sector, and it’s clear that we will need some form of external assistance to address the difficulties there,” the finance minister said.

His comments came after Central Bank governor Patrick Honohan became the first Irish official to declare a rescue package was inevitable.

Prof Honohan told RTÉ Radio yesterday morning he “absolutely” expected that the EU and IMF would provide a “very substantial” loan to Ireland that would run into tens of billions of euro.

He said the loan would likely be provided in the shape of a contingency fund which could be called upon if the banks required more capital.

The contingency fund would help reassure the international markets that help was available to the banks if they needed it, he said.

His intervention was welcomed by the opposition, who praised him for spelling out the “unvarnished truth”.

And it appeared to force the Government’s hand, with Mr Lenihan subsequently acknowledging that help would be required – and that the contingency fund envisaged by Prof Honohan would be a “desirable outcome”.

But privately the Government was understood to be seething over Prof Honohan’s comments, as the coalition hadn’t wanted to show its hand ahead of the discussions with the EU and IMF by conceding it would definitely need assistance.

Mr Lenihan refused to speculate on the size of the loan that would ultimately be required. Asked about Prof Honohan’s comments that it would run into tens of billions, the minister replied: “He may well be right on that, but figures have not even been discussed yet.”

Some analysts have predicted that the loan facility could be as high as €80bn.

But it will come at a cost, with the IMF indicating it would expect the Government to adopt some tough measures on top of the interest that will be charged.

“We get called in because the patient is sick,” IMF spokeswoman Caroline Atkinson said. “And we have some medicine which is the liquidity and the funds that we can provide, but we also have to suggest some – whether it’s dieting if you’ve got a heart problem – some other measures that may sometimes be difficult.”

But Taoiseach Brian Cowen said there was “no question of a loss of sovereignty”, claiming the Irish people alone would “determine our future”. He also dismissed suggestions that the country had anything to be “ashamed or humiliated” about.

Tánaiste Mary Coughlan stressed that Ireland’s low corporation tax rate would remain unchanged regardless of any demands the EU and IMF might make.

Similarly, Mr Lenihan denied that the negotiators would dictate either the four-year deficit reduction plan, which will be published at the end of this month, or the December budget.

“Of course, international organisations . . . advise on budgetary measures but they don’t direct, and that’s the current position, and I don’t see that changing,” he said.

The visiting officials are expected to trawl the banks’ books and the public finances.

IMF officials led by Ajai Chopra, the deputy director of the organisation’s European department, held initial discussions with the Central Bank yesterday.

Formal talks between the EU, ECB and IMF teams and the Government will get under way today.

Once the discussions conclude, and a loan application is made, a meeting of finance ministers from the eurozone countries will be called – most likely on a Sunday when markets are closed – to formally agree to the rescue package. Sources in Brussels said they believed the negotiations could be concluded by Sunday week.

Meanwhile, Fianna Fáil backbencher Ned O’Keeffe last night reiterated his call for Mr Lenihan to resign.

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