Ireland Asks For EU Bailout

After a week of denials, the Irish government finally bowed to the inevitable on Sunday night, and announced it was seeking a massive bailout from the EU.

It followed several days of "technical discussions" in Dublin between Irish officials and representatives of the IMF and European Union.

The rescue package could be as much as €90bn, although a final figure will not emerge until after detailed negotiations.

The money will be used to rescue Irish banks, which have seen billions of euro in deposits leave in recent weeks, and also to fund government spending, which currently exceeds revenue by €19bn a year.

The period of the loan is expected to be at least three years - meaning for that time all budget decisions will take place under the regular scrutiny of external overseers.

The conditions attached to the massive loan, and the rate of interest that will be charged are now matters for negotiations.

Meanwhile, the government is publishing a four-year budgetary plan which aims to cut the budget deficit by €15 billion.

That plan, which includes roughly €10 billion in cuts and €5bn in new taxes, is being submitted for EU approval.

The Irish request for a bailout, submitted after a Sunday evening cabinet meeting, was approved by European Finance Ministers in an emergency conference call that night.

The loan will be arranged through the IMF and the European Financial Stability Fund, and there have been additional offers of bilateral funding from the UK and Sweden.

"The banks were too big a problem for the country," said Finance Minister Brian Lenihan, "The key issue all the time for the Government is to ensure we do not have a collapse of the banking sector."

He indicated that Ireland may not draw down the full amount made available by the EU and IMF, but instead the money would be a contingency fund which served as a demonstration of the "firepower" behind the Irish banks.

A policy program to be agreed in negotiations over the coming week, will include a "deep restructuring" of the Irish banking system.

Taoiseach Brian Cowen said the banks would emerge from this crisis "significantly smaller than they have been in the past".

He said the program would also include measures to reduce the budget deficit. "Put simply, the Government has to increase taxes and reduce spending," he said.

However, Mr Cowen insisted the issue of Ireland's low corporation tax rate of 12.5% was not on the table, and he ruled out any change to it.

Sunday night's announcement followed a week where the Government struggled to keep the public informed about developments, and lost all credibility by denying that a deal was being discussed.

The previous weekend, international media outlets were being briefed by European officials that it was no longer a question of if a bailout would happen, but when.

But Government Ministers denied this was the case - Justice Minister Dermot Ahern described it as "fiction" and Enterprise Minister Batt O'Keeffe said Ireland would not be giving up an inch of its "hard-earned sovereignty".

But rumours persisted and it's since been confirmed that talks involving officials, but not politicians, were indeed underway at the time.

On Monday, Irish bond yields continued to rise, and there were growing fears among other Eurozone members that Ireland's problems were dragging other countries down too.

Ireland's leaders continued to insist it was fully funded as a country up until the middle of next year, and it did not need to apply for a bailout.

On Tuesday, Finance Minister Brian Lenihan was in Brussels meeting other ministers from around Europe, while at home the government was accused of lying to the people about what was really happening.

By Wednesday, the UK Chancellor George Osborne was offering help to "its closest neighbour" because it was in Britain's national interest that the Irish economy was successful.

And following the conclusion of the meeting of finance ministers, Brian Lenihan confirmed that a team from the IMF and EU would be arriving in Dublin the following day for what were being termed "technical discussions".

No official application for a bailout had been made, the government said, but it wanted to explore its options.

Finally on Thursday morning, the country got confirmation that a bailout was definitely on the cards from an unlikely source.

Central Bank governor Patrick Honohan found the words that the Taoiseach and Finance Minister had been unable to bring themselves to use - yes, the most likely outcome of the technical talks would be that Ireland was going get a loan worth "tens of billions" of euro.

Also on Thursday the Irish Times published a hard-hitting editorial, asking if the men of 1916 had died for "a bailout from the German chancellor with a few shillings of sympathy from the British chancellor on the side".

The paper said it was the loss of our economic sovereignty was "shameful".

It was melodramatic, but it matched the public mood, as did an outburst on RTE's Prime Time television program that evening by Labour's Pat Rabbitte, during which he lambasted Fianna Fail's Pat Carey.

The clip where he berates Carey's attempts at defending the government policy ("You ought to be ashamed of yourself coming on here with your aul' palaver") has been viewed over 100,000 times on YouTube.

On Friday, the first pictures of top IMF official Ajai Chopra and his team arriving in Dublin emerge - one photo of the team walking past a beggar on the street is on the front pages around the world.

Pressure piled on Taoiseach Brian Cowen, as he held a press conference at the opening of Dublin Airport's new Terminal 2.

By Sunday, even some members of his own party were admitting that the government had been irreparably damaged by the events of the week.

The Sunday newspapers carried stories that once the four year plan was published and the budget passed, there would be an attempt to remove him as leader of Fianna Fail.

But announcing the bailout on Sunday night, Brian Cowen remained defiant.

He defended his decisions over the past two years, saying the context in which he had taken them had continued to change and shift.

One journalist asked him if he was going to resign for "screwing up the country".

"I don't accept your contention, the premise of your question," Mr Cowen responded, "that I'm the bogeyman you are looking for. No."