Ireland has no choice but to accept the offer of a rescue package it requested.
That’s despite demonstrations reported overnight in Dublin as people protest at the deal, which many have called a ‘sell-out’.
The Greens, the main partner in the governing coalition, have split on the issue and want an election as soon as possible.
Prime Minister Brian Cowell is resisting pressure to call a poll in January of February after the budget is passed.
That will cut another 15 billion euros from spending as part of getting help from the EUY, ECB and IMF.
The country is broke and needs the money to save its banks and Europe needs to give Ireland enough money to save its banks.
No bailout and the knock on effect will be very damaging, especially in Britain, and Portugal needs Ireland to take the money to give it time to do a similar deal with Europe.
Markets across Europe and the uS fell overnight. Our rise yesterday was a one -off and we will be lower at the opening this morning.
So far the sums for the bailouts in the eurozone are: 110 billion euros for rescuing Greece, 80 to 90 billion for aiding Ireland
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Unlike Greece, Ireland has already cut deeply into spending and budgets, but couldn’t manage similar cuts to its damaged banks, which has brought the country undone.
Portugal will be next in the sights of investors. Its banks and government are all but cut off from the markets as spreads rise.
But a deal in Ireland might buy enough time to get some sort of support in place.
In any case, the Spanish banks and government would like to see something done, and quickly because like Britain with Ireland, Spain is on the hook for Portugal.
So the Europeans agreed to help Ireland, out of self interest, mind you in a sort of ritual of the inevitable.
"In the context of a joint programme EU/IMF, the financial assistance package to the Irish state should be financed from the European financial stabilisation mechanism (EFSM) and the European financial stability facility (EFSF), possibly supplemented by bilateral loans to be negotiated by EU Member States. The United Kingdom and Sweden have already indicated today that they stand ready to consider a bilateral loan, “the statement from the rescuers said.
"EU and euro-area financial support will be provided under a strong policy programme which will be negotiated with the Irish authorities by the Commission and the IMF, in liaison with the ECB."
And why did Ireland need help?
It has no money. No one believes the government when it says it has enough cash. The banks have been on life support from the European Central Bank, and also the Irish central bank. The total cost of that, 150 billion euros, at least, a month
So just as in 2007, Ireland’s banking crash forced the government to underwrite and guarantee it (thus forcing many other governments around the world to follow suit), so the final act in that rescue, the prospective collapse of those banks and Ireland in 2010 or 2011, has forced Europe to guarantee Ireland.
The two largest creditors to Ireland are the UK and Germany, with loans outstanding of $US149 billion and $US139 billion respectively.
An Irish bank default would have damaged the German and British banking systems directly, and required significant domestic bank bail-outs.
Seeing the UK banking system is dominated by the government (controlling two majors in RBS and Lloyds), the credit standing of the UK would have been questioned, at a time when the government is about to start a massive austerity program. Saving the banks for the second time in three years and cutting spending would not have worked.
In more powerful Germany, where sentiment remains sceptical of the bailouts, the government would have had to backstopped many of its banks (it controls at least two majors at the moment).
That would then have seen Portugal pushed up to the block.
And in turn that would have threatened Spain, which is the major creditor to Portugal with a total of $US78 billion in loans, bonds, etc at risk.
Therefore, just as in 2007 the impending collapse of the Irish banks needed a huge life raft; now a second one was needed to save the rest of Europe.
But Ireland was exhausted and a pariah in the markets, just as Greece was.
With domestic support lines exhausted and the government trapped in a situation of its own making, the collapse of Ireland’s banks would have triggered a knock on effect that could have damaged two, possibly three more economies in Europe, and plunged the world back into the dark days of September-December 2008.
But don’t feel for Ireland or blame the nasty euro or those Germans.
While Ireland was cleaner, with sensible economic policies about tax, foreign investment and confidence and the like, it had a lousy, and corrupt (certainly incompetent) culture of entitlement among its business class, supported by regulation of the banks and business that failed to understand where the line should be between healthy business drive, self-interest and enrichment.
The rigidities of the eurozone and euro may have played some role in creating the conditions for the mess to happen, but for all intents and purposes, this was a home-grown failure.
Successive governments allowed the banks to raise money (and allowed endless numbers of financial groups, large and small to take
