BRUSSELS — European officials scrambled Tuesday to stop Ireland's debt crisis from turning into another Greek-style meltdown and dragging down the euro currency. Talks over solutions, including possible help for Ireland's troubled banking system, went into the night.
Only months after saving Greece, the 16-country eurozone has been shaken anew by concerns that Ireland will be unable to pay the cost of rescuing its banks, which ran into trouble when the country's real estate boom collapsed and their risky loans to developers stopped being repaid.
Ireland is on the hook for the bank losses — but wants nothing to do with the sort of European Union bailout that pulled Greece back from bankruptcy in May. That kind of intervention that could threaten the nation's status as a low-tax haven and humiliate the government ahead of possible national elections early next year.
Investors, meanwhile, are clamoring for a solution. Growing doubts about Ireland's ability to pay its bills have sent interest rates soaring on Irish bonds, making recovery even more difficult. European nations are worried — as they were with Greece — that Ireland's problems will make borrowing more expensive for economically vulnerable countries like Portugal and Spain and push them to the brink of default, threatening the stability of the euro.
The European Union's top monetary official, Olli Rehn, said the focus was on a bailout not of the Irish government but of Irish banks. He said the EU was working with the European Central Bank, the International Monetary Fund and national governments to find a solution.
"This is not a matter of the survival of the euro, this is a very serious problem in the banking sector of Ireland," Rehn said.
Jean-Claude Juncker, who heads the group of 16 nations use the euro, said that the €750 billion ($1.01 trillion) financial backstop eurozone governments set up together with the IMF last spring could be used to support the Irish banks.
Irish Prime Minister Brian Cowen said the government neither wants nor needs a bailout and reiterated that his government is fully funded through mid-2011.
He said before the Irish parliament in Dublin that Irish officials have been talking "with our European counterparts to see in what way market risks can be taken out of the equation." He declined to elaborate.
Stock prices fell worldwide and gold and other commodities plunged in value as investors awaited word from the talks in Brussels.
The euro fell 0.7 percent against the dollar to $1.35, and yields on Irish bonds rose again as investors' expectations ebbed for an early decision on an Irish bailout — which would be expected to guarantee they will get paid back on their holdings.
The yield on 10-year Irish treasuries rose to 8.25 percent from Monday's closing yield of 7.94 percent. Yields rise as bond prices fall, and higher yields signify more investor perception of risk they won't get paid back.
Ireland has postponed returning to the bond market until early 2011 in hopes that the interest rate demanded by investors will have fallen by then.
Ireland's minister for European affairs, Dick Roche, suggested that others in the EU were panicking over how to manage Ireland's €45 billion ($61 billion) bank-bailout bill and its deficit, which is forecast to reach a staggering 32 percent of GDP this year, a record for postwar Europe.
"I would hope that after the meeting this afternoon and tomorrow there would be more logic introduced to this. There's no reason why we should trigger an IMF or an EU-type bailout," Roche said. "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."
- How one woman unplugged from technology for...
- Utah construction companies fined, ordered to...
- It can cost you $12,000 a year to buy...
- Internet billionaires face off in renewed...
- Can a company really be altruistic?
- Uber, Lyft refuse to require driver fingerprints
- What could McDonald's do to fix its business?
- Technology and outdoor sports converge at...
- What could McDonald's do to fix its... 11
- Utah construction companies fined,... 8
- How one woman unplugged from technology... 6
- It can cost you $12,000 a year to buy... 4
- Photos: Sharing birthday wishes 2
- First lady: Tech industry to train,... 1
- Greece under fire from creditors as... 1
- Diet Pepsi dropping aspartame on... 1