The European Union, the International Monetary Fund and the European Central Bank are working on a solution for the Irish banking sector, EU economic and monetary affairs commissioner Olli Rehn confirmed today.
“We are discussing with both the ECB and the IMF and of course the Irish,” Mr Rehn told reporters in Brussels today ahead of a meeting of European finance ministers.
“The real problems are in the banking sector,” not with the Dublin government, “but these are connected,” he said. “We have a very strong focus on the banking sector,” Mr Rehn said.
Rehn’s statement came after a weekend of contradictory spin and political pressure over the economic future of the 26-County state. The Dublin government has repeatedly denied that any bailout is needed or sought, but admitted “contacts” were taking place. Government ministers only admitted that EU cash could be used to help fill the financial black hole in the state’s banking system.
The discussions take place amid legal doubts and political disputes about whether the EU’s special new bailout funds, backed by the International Monetary Fund (IMF), could be used to directly subsidise Ireland’s notorious banks without triggering the austerity clauses and conditions attached to a full state bailout.
Minister of State for Europe Dick Roche this morning said Europe should not panic as there was no need by the 26-County State for the international support mechanisms. He predicted a resolution of the crisis by tomorrow, and said he hoped it would focus solely on the banks.
Roche told BBC Radio 4 that there is “no reason” why the state should trigger an IMF or EU bailout.
“There is a problem with liquidity in banks, but I don’t think the appropriate response to that would be for European finance ministers to panic,” he said.
Taoiseach Brian Cowen last night said an application for help was not being made because the country had enough cash to last up to the middle of next year.
“I have a job to do which is to ensure we do the right thing by the country,” said Mr Cowen.
Sinn Fein spokesperson on Finance, Arthur Morgan said that the credibility of the country was at stake due to the government’s inept handling of the current economic crisis.
“What this State needs is a Government clear-out not an EU bailout,” he said.
“The credibility of the Government’s banking strategy is shot. The lender of last resort is soon to close its doors to Irish banks and it is clear that the Government’s failed banking strategy is leading Ireland down the path of EU/IMF intervention.
“The dire state of the Irish banking system and its inability to recover is making the possibility of EU bailout a reality.
“The Government’s sheer incompetence in dealing with the banks is causing the vultures to circle. We may have enough cash to see us into next year, but the ECB are supporting the banks with funding and this will not last forever.
“The state needs a Government clear-out, not another bank bail-out. This banking system cannot be salvaged in its current form.
“The Government is responsible for the loss of Ireland’s economic sovereignty. The ECB funding of our banking system and the repeated extension of the bank guarantee are symptoms of this.
“All of this coupled with the Governments refusal to countenance negotiating with subordinated bond holders in the Irish banks have contributed to the economic mess we now find ourselves in. This Government needs to get out of office and give the people a General election.”