DUBLIN — Debt-burdened Ireland is talking with other European Union governments about how to handle its troubled finances, officials said Monday as the continent's debt crisis plagued markets and policymakers across Europe.
Irish officials denied the talks were aimed at getting a financial lifeline from the EU's bailout fund, while already-bailed out Greece revealed revised figures showing a bigger budget deficit.
EU chiefs meeting in Brussels on Tuesday are anxious to quell market fears of an eventual Irish debt default. Those fears are driving up the borrowing costs of other EU nations saddled with red ink, notably Greece, Spain and Portugal.
Analysts said investors needed the finance ministers in Brussels to offer a clear path forward for Ireland to reduce its deficit and bear the costs of its enormous bank bailout. Otherwise markets would continue to dump the bonds of EU's peripheral nations.
The Irish Department of Finance said in a statement it was pursuing "contacts at official level" but aides to Finance Minister Brian Lenihan emphasized Ireland has no need for emergency aid from the EU bailout fund set up after Greece needed to be rescued from bankruptcy in May amid fears other countries would need help too. Ireland says it had enough cash to last through mid-2011.
But market turmoil like that which preceded the Greek bailout won't go away. Ireland is struggling to slash a deficit that has ballooned this year to a staggering 32 percent of GDP, a record for post-war Europe.
While Greece spent its way to disaster, much of Ireland's 2010 deficit involves the government's €45 billion takeover of five banks that ran into trouble following the 2008 collapse of the country's real estate boom.
Adding to the pressure on euro-zone finance ministers, the European Union's statistics agency said Monday that Greece's 2009 budget deficit and debt were significantly higher than previously estimated.
The revised budget deficit for 2009 of 15.4 percent of GDP will make it harder for the Greek government to reach targets specified in its €110 billion bailout agreement in May. While Greek officials had forewarned investors of a likely rise in its deficit, it reinforced fears that the euro-zone's most debt-troubled members — Greece, Ireland and Portugal — wouldn't be able to turn the tide of red ink.
In Dublin, Finance Department officials declined to comment on Irish media reports that the government wants the EU fund to support the short-term cash needs of particular Irish banks, rather than the state. Three of the five bailed-out banks have already been nationalized, and Allied Irish Banks appears certain to be nationalized too within weeks. Only Bank of Ireland has been able to borrow money on the open market.
The yield, or interest rate, on Ireland's 10-year bonds fell Monday in expectation that other EU nations would intervene to ease the Irish cash crisis. The yield rate opened at 8.14 percent and slid to 8.02 percent in afternoon trade. High yields reflect weak market confidence in ability to pay. They also compound Ireland's effort to reverse its gigantic deficits because it means higher interest costs on any new borrowing in the markets.
The yield peaked Thursday at a record 8.95 percent — before several key EU members, led by Germany, issued a statement stressing that they had no plans to make bondholders eat losses in event of an Irish bailout.
German Chancellor Angela Merkel in recent weeks has stressed her view that it's not right to make taxpayers, not bondholders, solely responsible for bailing out governments and banks. The markets reacted by dumping the securities of the most vulnerable EU members, including not just Ireland, Greece and Portugal but also to a lesser extent Italy and Spain.
In Paris, Greek Prime Minister George Papandreou said Germany had been naive not to realize the risk.
- CNN hires fired Trump campaign manager...
- Rio Olympic organizers unveil village where...
- Clinton failed to hand over key email to...
- The newscasters who have made the most cameos...
- Agent: LeBron James to skip Rio Olympics
- Rescuers search rubble in east China after...
- Britain will leave the 28-nation European...
- 'No' to Obama's immigration plans, Supreme...
- In need of help, Trump finds few... 39
- Big ruling for abortion rights in... 36
- Did Trump really just become a... 36
- The pro-life plan that could reverse... 35
- House Republicans' report faults Obama... 34
- Love won't go to GOP national convention 34
- Supreme Court abortion decision could... 31
- Trump, in Scotland, links Brexit vote... 26