Meeting over Irish rescue scheme

Prime Minister Brian Cowen is to call a general election in the new year

European finance ministers are to meet in Brussels to discuss the details of a bailout worth more than £85bn euros ($113bn; £72bn) for the Irish Republic.

The representatives from Eurozone countries will be later joined by those from outside – including UK chancellor George Osborne.

On Saturday thousands demonstrated in Dublin against the IMF and EU bailout, and the government’s austerity budget.

It aims to resolve the country’s debt crisis via tax rises and spending cuts.

The EU and the IMF have agreed to the financial bailout, but the ministers want to reach an outline agreement before the financial markets reopen on Monday.

Communication Minister Eamon Ryan said an outline agreement for the deal was likely to be reached by Sunday night, the Press Association news agency reported.

State broadcaster RTE had reported that the interest rate to be paid on part of the loan could be as much as 6.7%, higher than the rate charged to Greece for its bail-out, which has raised concerns from opposition parties.

But Mr Ryan said negotiations about the interest rate for any loans were still ongoing.

“It’s not fixed yet and we’ll have to wait and see until it’s actually done.

“The overall figure has to make sense for us in that we are able to pay it back,” he said.

Protesters vented their fury about the austerity package and bail-out

The austerity package, announced on Wednesday by Prime Minister Brian Cowen, includes proposals to cut the minimum wage, slash the number of public sector jobs and increase taxes in order to save 15bn euros over the next four years.

It still has to go before the Dail (Parliament) before it can be passed but the budget has angered protesters.

On Saturday, the protesters marched to Dublin’s General Post Office, the site of the nationalist uprising against British rule in 1916, to vent their anger.

Organisers said more than 100,000 people took part in Saturday’s protest, while the Irish police (Gardai) estimated that “in the region of 50,000” were involved.

A spokesman for the Irish Congress of Trade Unions president, Macdara Doyle, told the BBC that the protest was designed to send out a clear message: “We’re trying to convince government and show government that there’s no support for their plan amongst civic society and that every measure they have taken to date has been exactly the opposite of what they need to do.

“Our fears about the new budget is that it’s deflationary multiplied by ten. It’s taking far too much money out of the economy, and whatever possible chance there is of some sort of growth taking hold in the economy will be killed by this proposed budget.”

What went wrong in the Irish Republic

The 1990s were good for the Irish Republic’s economy, with low unemployment, high economic growth and strong exports creating the Celtic Tiger economy. Lots of multi-national companies set up in the Republic to take advantage of low tax rates.

At the beginning of 1999, Ireland adopted the euro as its currency, which meant its interest rates were set by the European Central Bank and suddenly borrowing money became much cheaper.

Cheap and easy lending and rising immigration fuelled a construction and house price boom. The government began to rely more on property-related taxes while the banks borrowed from abroad to fund the housing boom.

All this left Ireland ill-equipped to deal with the credit crunch. The construction sector was hit hard, house prices collapsed, the banks had a desperate funding crisis and the government was receiving much too little tax revenue.

The economy has shrunk and the government has bailed out the banks. A series of cost-cutting budgets have cut spending, benefits and public sector wages and raised taxes. But there are still doubts about future government funding.

The main concern for the Republic’s economy is its banks, most of which are now controlled by the government. They have had to borrow at least 83bn euros (£71bn) from the European Central Bank because other banks will not lend to them.

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Joan Burton, finance spokeswoman for the Labour Party said the government had to secure a fair deal for Irish taxpayers at the Brussels meeting.

“From day one of this crisis, the government has prioritised the interests of the banks and their investors over the interests of ordinary people. This has to change,” she said.

Sinn Fein Dail leader Caoimhghin O Caolain called on the government to end the talks and added: “No such deal to place the state in economic bondage can be binding on a future government and should not be honoured.”

But Mr Cowen’s government has insisted the austerity plan and next month’s budget are crucial steps to show fellow members of the 16-nation eurozone that the Irish Republic is putting its finances in order.

The bailout money is expected to come from a number of different sources, with the IMF loan expected to be the cheapest money but European money likely to more expensive, particularly the money from the European Stability Facility.

The UK has offered the Irish Republic a direct bilateral loan on top of its contribution to the international funds under discussion.

Chancellor George Osborne said it was in the UK’s interest to assist its neighbour and said: “Ireland is a friend in need, and we are here to help.”

The crisis in the Irish Republic has been brought on by the recession and the almost total collapse of the country’s banks.

This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.