Bailout 'is about the euro as well as about Ireland'

A spokesman for Economic Affairs Commissioner Olli Rehn has said the aim of the EU-IMF bailout was to stabilise the euro as much as to support the Irish economy.

Anxious not to add to market volatility as accountants from the European Commission, European Central Bank and the International Monetary Fund continue scouring Ireland's books, the Commission spokesman insisted that there was no agreed bail-out figure on offer yet.

“When they have finished their work, which could be by the end of the month, the terms of the deal will have to be approved by the Irish Government and then endorsed by EU finance ministers within and outside the eurozone,” said Amadeu Tardio, spokesman for Olli Rehn.

“These measures were decided in order to safeguard the financial stability of the euro-area and the EU as a whole – but we can’t anticipate what the markets will think, " he said. “It all hangs on the efforts of the Irish government itself.”

The big question is how much belt-tightening the international experts will demand as the price of a bail-out expected to amount to collateral of approaching €100bn.

Later this week they will scrutinise the Government's four-year recovery programme, with its commitment to budget cuts of €6bn next year as part of efforts to get a massive deficit of 32% of GDP down to just 3% by 2014.

The number-crunchers may demand more stringent measures, but EU finance ministers issued a statement last night expressing confidence in the “strong fundamentals” of the Irish economy – more words designed to stop investors abandoning the euro and causing single currency “contagion” to other weaker euro nations such as Portugal and Spain.

Mr Tardio today tried to distance the Irish crisis from that of Greece and the others, insisting: “There are no analogies to be made.”

The Greek problem had been an economic crisis built on unreliable accounting information which hid the true nature of its debt and deficit levels, and the Irish case was “very specific” – largely caused by an overheated banking sector.

“In Portugal the banking sector is healthy and resilient, so it is a completely different situation,” he said. “The Spanish situation is being handled adequately through job cuts and fiscal consolidation.”

Nevertheless the prospect of one country or another dropping out of the euro is now considered at least a possibility, if still unlikely.

That would call into question the whole future of the European Union, according to German chancellor Angela Merkel and European Council President Herman Van Rompuy, in separate highly-publicised statements.

One Commission official was asked if such declarations were considered helpful at such a delicate stage in the euro’s evolution.

He replied with a grimace and his own question: “What do you think?”