Ireland unclear on aid amount

DUBLIN: Ireland came under renewed pressure from euro zone partners on Friday to accept quick support for its banks, but Dublin said it remained unclear for now how much its battered financial institutions required, Reuters reported on Friday.

A day after Ireland‘s central bank chief acknowledged the country needed a loan running into tens of billions of euros to shore up banks that have grown dependent on ECB funds, the euro edged up on expectations of an aid deal and Irish bond spreads narrowed.

Reflecting concerns among other euro zone periphery countries that a delay in cleaning up Ireland‘s financial mess could sow contagion in the 16-nation single currency bloc, Greece‘s finance minister pressed Dublin to move fast.

“We are now at a point where decisions have to be taken,” George Papaconstantinou told a European banking congress in Frankfurt. “Time is of the essence.”

Irish Community Minister, Pat Carey, said the government would publish the details of its four-year fiscal plan to save £15bn early next week, before a November 25 by-election which threatens to cut the already razor-thin parliamentary majority of unpopular Prime Minister, Brian Cowen.

Carey said that it was impossible to say how much aid Ireland would need until a joint mission of the European Commission, European Central Bank and International Monetary Fund, which arrived in Dublin on Thursday, had gotten to grips with the state of the banks.

”Until such a time as the IMF and others have examined how critical the situation in the banks is, I think it would be impossible to say how much would be required,” he added.

Banks in Ireland have been largely shut out of market lending due to concerns about their solvency. They are almost entirely reliant on funding from the ECB, which reached £130 by October end plus an extra £35bn from the Irish central bank.

Allied Irish, the hardest hit listed Irish bank, was expected to give a trading update later on Friday which would be closely scrutinised for signs of any rise in retail deposit withdrawals.

European Union sources have told Reuters that Ireland may need assistance of between £45bn and £90bn, depending on whether it needs help only for its banks or for public debt as well.

Dublin‘s borrowing costs have rocketed since late October as concerns about the banks‘ swelling liabilities and a German-led drive to create a system for restructuring stricken euro zone state debts unsettled investors.

Markets settled down in recent days after it became clear Ireland was open to financial aid. On Friday, the euro pushed up to $1.37 and the risk premium on Irish 10-year bonds edged down to 5.5 percentage points over German benchmark Bunds.

The bond spreads of other financially weak euro countries like Greece and Portugal also fell.

A currency economist at Bank of Tokyo-Mitsubishi UFJ, Mr. Lee Hardman, said,”There is a degree of calm on anticipation of a near-term resolution for the Irish banks, which has fed to renewed risk-taking and a relief rally for the euro which could potentially rise to $1.40.”
Source:http://www.punchng.com/Articl.aspx?theartic=Art201011211304285