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Posts Tagged ‘bailout’

Irish lawmakers to vote on EU-IMF bailout deal

In Uncategorized on December 16, 2010 at 9:46 am

 Ireland’s parliament is set to back the country’s 85-billion-euro (113-billion-dollar) EU-IMF bailout later Wednesday, but it will be a close vote, a key independent lawmaker said.

Joe Behan, a former member of Prime Minister Brian Cowen’s Fianna Fail party, told AFP on Tuesday that he expected the vote to be “extremely tight.”

“It could be passed by just two votes,” added Behan.

The bailout deal for crisis-hit Ireland comprises 67.5 billion euros in external loans and guarantees from the European Union and International Monetary Fund, with another 17.5 billion euros from the Irish government.

Irish police guard the front gate of the Irish Parliament building (Dail) in Dublin, Ireland, on December 7, 2010.

Lawmakers will vote later Wednesday at the Dail, or lower house of parliament, amid stubborn market worries over the eurozone debt crisis.

Cowen’s parliamentary party has called for the vote to “add political legitimacy to the agreement and to force the opposition to take a definitive position on the matter.”

Behan, now an independent lawmaker in the Wicklow constituency south of Dublin, has backed the government’s budget measures and will be voting for the deal.

The lawmaker, who resigned from Fianna Fail in 2008, added that he was “very, very sceptical” that the opposition would be able to negotiate a better bailout deal if they got into power.

Cowen has said opposition parties were still trying to make the public believe that there was “an easy way out” of the country’s funding crisis.

The vote would give them the opportunity “to either come clean, recognise that this deal is essential and in the best interests of the country, or spell out their alternative,” he argued.

But Cowen’s personal standing has plummeted to just eight percent in the polls and support for his party is also down sharply: it is at 13 percent compared to the 42 percent backing it received in the 2007 general election.

Judging from the polls, it is facing a drubbing when the country holds elections again early next year.

Ireland’s opposition parties — who have already voted against the government’s annual 2011 budget — have said they will also reject the EU-IMF memorandum of understanding on the bailout.

Dr James Reilly, deputy leader of the main opposition Fine Gael party, described the decision to vote on the bailout as a “political stunt” to deflect attention from the dismal nature of the deal.

Fianna Fail had initially refused to hold a Dail vote on the deal, he said. “Now they can’t wait to have one. The only thing that has changed is Brian Cowen’s need to keep his restive backbenchers happy.

“Fine Gael has already made it quite clear that we regard the IMF-EU bailout package as a most incompetent piece of negotiation.

“It makes no sense for Fine Gael to support a vote on a bailout which we intend to renegotiate. Such a move would only weaken the ability of a Fine Gael Government to renegotiate the deal after an election,” Reilly said.

But government chief whip John Curran was confident the bailout will be endorsed with the help of independent lawmakers.

“Yes, I do believe that the government will have the numbers to pass this motion without the support of the opposition,” he said in a statement.

The IMF’s executive board has decided to delay consideration of the rescue plan for Ireland until after Wednesday’s vote.

Source: SGGP

Irish bailout talks accelerate as PM faces new setback

In Uncategorized on November 26, 2010 at 11:21 am

DUBLIN, Nov 26, 2010 (AFP) – Ireland’s government was Friday awaiting the results of a by-election expected to cut its already slim majority, as talks on an international bailout for the country’s ailing economy gathered pace.

As polls closed Thursday, Prime Minister Brian Cowen’s Fianna Fail party was widely expected to lose its seat in County Donegal in northwest Ireland to the nationalist Sinn Fein party.

Protesters hold a demonstration in Dublin on November 24.(AFP)

If they did lose the seat it would cut the coalition government’s majority to just two seats.

A day after publishing a four-year package of austerity measures designed to smooth the way towards huge loans from the EU and IMF, Cowen warned Thursday that everyone would have to tighten their belts if Ireland was to recover.

Cowen told parliament the plan — unprecedented in Irish history — gave people a chance to see the sharp “adjustment” necessary to shore up the national finances and “plan ahead for the future”.

“People in their own household experience know that you can’t go on with a situation if your revenues are back to what you were earning in 2003 and that your spend is right up to date in 2010 terms.

“People know that is not a sustainable position,” he said.

Having built up a deficit equivalent to 32 percent of gross domestic product this year, Ireland is in talks to borrow about 85 billion euros (114 billion dollars) from the European Union and the International Monetary Fund.

Negotiations on the bailout are set to wrap up on Sunday, diplomatic sources in Brussels told AFP.

The international intervention to help Ireland has failed to remove doubts about its ability to stabilise its shattered finances.

That concern, and fears of contagion spreading to Portugal and the far larger Spanish economy, continued to hurt the euro, which was worth 1.3360 dollars at 0100 GMT.

Nor was the austerity plan enough to calm the bond markets: the yield on benchmark 10-year government bonds jumped to record highs above 9.0 percent as markets remained nervous.

The draconian austerity plan and a budget on December 7 are crucial steps to show Ireland’s fellow eurozone members that it is putting its finances in order.

The 15-billion-euro series of austerity measures include slashing 25,000 jobs, raising VAT, or sales tax, to 23 percent, and cutting the minimum wage.

Ireland has however managed to preserve its ultra-low 12.5 percent corporation tax rate, a key reason that foreign companies have invested there.

Economists supported Ireland’s tax stance.

“This will send out a clear statement that Ireland, despite its economic difficulties, is still very committed to incentivising the creation and maintenance of high value jobs,” Ernst and Young’s Kevin McLoughlin said.

The government’s decision to turn to the EU and IMF has enraged Cowen’s opponents, who accused him of humiliating the country.

The anger surfaced in the by-election in Donegal South West, a rural area of northwest Ireland where resentment towards the EU runs high. Polls opened at 0600 GMT and closed at 2200 GMT with the result set to be declared late Friday.

Turnout for the poll was expected to be well down on the 66 percent seen in the last election as mistrust in the political system convinced voters to stay at home.

In Donegal town, butcher Ernan McGettigan said he saw a grim future ahead.

“The way our country is going at the moment we will have to declare ourselves bankrupt.

“There are only four million people and we have incurred a debt of around 4,000 euros for every person.”

President Mary McAleese recognised the nation’s rage. “I want to acknowledge the understandable distress and dismay being experienced by people all around the country who feel fearful about their future,” she said.

Finance Minister Brian Lenihan acknowledged there was “no denying the reputational damage Ireland has endured” in the economic crisis.

But writing in the Financial Times, he argued that the country had the attributes to pick itself up and stressed that the country still ranked second in Europe for productivity.

“The government faces many challenges but we have the necessary support to pass the budget in December,” Lenihan insisted.

Source: SGGP

Ireland unveils 15-bln-euro austerity plan to secure bailout

In Uncategorized on November 25, 2010 at 5:20 am

DUBLIN, Nov 25, 2010 (AFP) – Ireland unveiled a 15-billion-euro austerity package Wednesday required to unlock an international bailout, slashing public sector pay and pensions but refusing to raise corporation tax.

With the eyes of Europe on his debt-ridden nation, Prime Minister Brian Cowen said his four-year package of cuts and tax increases would restore shattered confidence, calling it a signpost on the road to recovery.

A women looks at works of art for sale from the Bank of Ireland auction in the Shelbourne Hotel in Dublin, on November 24, 2010. AFP

“We can and we will pull through this as we have in the past,” Cowen told a news conference.

“We are a smart, resilient, proud people and we are going to come through this challenge because we love our country.”

The 20-billion-dollar plan, to be followed by a budget on December 7, is an essential step towards Ireland receiving a bailout of up to 85 billion euros (114 billion dollars) from the European Union and the International Monetary Fund.

The aim is to slash the public deficit to below three percent of gross domestic product, in line with EU rules, after it ballooned to 32 percent of GDP this year.

Among the key points of the package, sales tax will be raised to 23 percent from 21 percent by 2014, but the 12.5-percent corporation tax rate — a key attraction for foreign companies to invest in Ireland — will be maintained.

The government said it expected unemployment to be brought below 10 percent by 2014, from its current level of over 13 percent.

The minimum wage will be cut by one euro to 7.65 euros an hour, but the government said it would still be one of the highest rates in the EU.

The EU’s economic commissioner Olli Rehn said the package was “a sound basis for the negotiations” on the international bailout.

As Ireland strove to prove it was trying to get its house in order, another heavily-indebted eurozone country, Portugal, was paralysed by a general strike on Wednesday called to protest against deep spending cuts.

The EU fears Portugal will be the next eurozone nation to require a bailout after Greece and Ireland.

Chancellor Angela Merkel said Germany was prepared to help Ireland, but its support was conditional on Dublin “making clear what steps (it) must take to get back on a path of stabilisation”.

Cowen meanwhile fought off calls from the opposition Tuesday to call a snap election, insisting the budget must be passed first.

Irish lawmakers are unlikely to vote on the budget until January, meaning that an election could not take place until February or March.

The EU has told the main Fine Gael opposition party that while the plan’s fiscal targets are non-negotiable it will re-negotiate specific details with an incoming government, finance spokesman Michael Noonan said.

Noonan insisted the plan was “disappointing in its poverty of ambition and detail.”

Experts warned that the plan would not immediately ease Ireland’s problems.

“Uncertainty caused by the collapse of the government… will continue to hang over Ireland in the coming weeks,” National Irish Bank economist, Ronnie O’Toole, said.

IHS Global Insight economist Sonia Pangusion predicted “the downtrend in consumer confidence will accelerate,” adding that the plan for an export-based recovery “increases Ireland’s economic risk.”

The government has been under pressure since caving in and agreeing to accept the bailout on Sunday night.

Despite reports that it is worth 85 billion euros, Cowen told parliament earlier Wednesday the amount had still to be decided as negotiations were ongoing.

The international loans to Dublin are in part intended to shore up banks left with huge debts from the collapse of an overheated property market.

But the bailout is also designed to stem fears of contagion in other eurozone nations such as Portugal and even the far larger Spanish economy, which came under pressure on the markets.

Spain’s deputy finance minister Jose Manuel Campa insisted that “an abyss separates us from Ireland”.

Despite the efforts to shore up the single European currency, the euro fell slightly below 1.34 Wednesday after sinking below 1.33 dollars earlier because of fears over the eurozone and the Korean crisis. 

Source: SGGP

Ireland in chaos as bailout triggers election

In Uncategorized on November 24, 2010 at 4:51 am

DUBLIN (AFP) – Ireland’s political turmoil intensified Tuesday after Prime Minister Brian Cowen promised to call a general election in the New Year once parliament passes a budget at the centre of an international bailout.

It could take several weeks for the budgetary process to be completed and Cowen would then have to formally dissolve parliament and set an election date, meaning an election may not be held until February or March.

The Irish Prime Minister Brian Cowen said on Monday that he would call an early election in January, but resisted calls for his immediate resignation. AFP

Two independent members of parliament on whom the government depends to pass legislation said they were likely to withhold their support, raising fears that the crucial budget might not be passed at all.

Cowen, who entered a coalition government with the Green Party in 2008, on Monday bowed to calls from its disgruntled junior partner to call an election in the wake of Ireland accepting a bailout worth up to 90 billion euros (122.5 billion dollars).

The prime minister said the debt-ridden country’s priority must be to pass the six-billion-euro budget on December 7.

“It is my intention at the conclusion of the budgetary process, with the enactment of the necessary legislation in the New Year, to then seek the dissolution of parliament,” the leader — alternatively known as the Taoiseach — told a news conference.

“It is imperative for this country that the budget is passed,” he added.

Opposition parties were angered by Cowen’s refusal to call an immediate vote.

The main opposition Fine Gael party said the people of Ireland had “absolutely no confidence” in the government and Sinn Fein party president Gerry Adams demanded immediate action.

“I totally disagree with the Taoiseach’s assertion that the imperative is to get the budget passed,” Adams said. “The budget should be suspended. The Taoiseach should call an election now.”

The Guardian newspaper Tuesday doubted Cowen’s chances of being leader at the election.

The British broadsheet quoted a senior source at Cowen’s party, Fianna Fail, as saying “we cannot go into a general election with Brian as leader after the events of last week. His credibility is shattered.”

European Union Economics Commissioner Olli Rehn insisted that political upheaval would not jeopardise the rescue deal which Ireland struck with the EU and the International Monetary Fund on Sunday.

“I don’t see that it will threaten the EU-IMF programme or its negotiations,” Rehn told journalists on the sidelines of a hearing before a committee of the European Parliament in Strasbourg.

The elections “will take place… in January, and our negotiations will be concluded by the end of November,” he added.

Ireland’s request for financial assistance initiated a day of drama in Dublin on Monday.

Green Party leader John Gormley, whose party has six seats in parliament, called on Cowen to name a date for the country to go to the polls, saying the Irish people needed “political certainty.”

Gormley said that in the meantime his party would support the government in getting the emergency budget through parliament.

In a sign of the anger about the bailout a hundred protesters forced their way through the gates of the parliament building before being pushed back by police.

Cowen’s party faces a by-election on Thursday in the northern constituency of Donegal South-West which it is likely to lose.

Having dominated Irish politics since the 1930s, defeat for Fianna Fail in the general election would represent a significant moment in the country’s history.

Ireland’s request for aid was approved by EU officials who were desperate to quell fears that other heavily-indebted euro economies such as Portugal could be sucked into the crisis.

News of the bailout initially calmed fears about the single European currency, with the euro rising above 1.37 dollars before it fell back to 1.3571 dollars by 0130 GMT.

The EU has agreed in principle to use a 750-billion-euro fund, the European Financial Stability Facility, which was set up in May after a 110-billion-euro EU-IMF bailout of Greece.

Britain, not part of the 16-country eurozone, said it was in its “national interest” to consider a separate loan to Ireland of about seven billion pounds (11.2 billion dollars).

Ireland’s public finances have been ravaged by a property market meltdown and the global recession. Domestic banking sector rescues have severely restricted the country’s room for manoeuvre.

Source: SGGP

Ireland lands bailout of up to 90 billion euros

In Uncategorized on November 22, 2010 at 10:05 am

Spain does not need financial bailout: EU Commission

In Uncategorized on May 5, 2010 at 12:39 pm

BRUSSELS, May 5, 2010 (AFP) – Spain does not need the kind of financial bailout package which has been offered to Greece, the EU’s Economic Affairs Commissioner Olli Rehn said on Wednesday, damping down market expectations.

“There is no need to propose financial assistance,” for Madrid, Rehn told reporters as he unveiled the commission’s new economic forecasts for 2010 and 2011.

“No, we’ll not do it,” he added, in when asked whether the eurozone would be forced to put together the kind of multi-billion euro loan rescue package it is organising for Greece, which is under pressure massively to reduce its deficit and pay down its loans.

Rehn criticised the fierce market speculation which has put Greece in its cross hairs and is seen turning its attention to Spain and Portugal where deficit are also running uncomfortably high.

“There’s no limit to the speculation,” he complained.

The rumours swirled around the markets on Tuesday, many suggesting that Spain was on the point of turning cap in hand to its EU partners or the IMF, provoking a sharp falls on European stock markets.

PAME union members block the entrance to a ferry in the port of Piraeus in Greece due to a 24-hours strike on May 5, 2010. AFP photo


Source: SGGP

European markets fall despite Greece bailout

In Uncategorized on May 3, 2010 at 12:32 pm

PARIS, May 3, 2010 (AFP) – The euro and European stocks fell on Monday on scepticism over a bailout for Greece and huge austerity measures Athens is promising, while a shadow of debt contagion hung ominously over Europe.

“Although Greece has had a lifeline from the IMF… the market is not assured that the worst has passed,” said Thio Chin Loo, a senior currency analyst with BNP Paribas in Singapore.

The euro fell to 1.3232 dollars on Monday from 1.3300 late on Friday when it had rallied on expectations of a rescue for Greece at the weekend.

European shares also fell in mid-day trading with the Frankfurt DAX shedding 0.17 percent and the Paris CAC losing 0.62 percent. The London stock market was closed for a public holiday.

Eurozone finance ministers and the International Monetary Fund endorsed on Sunday a 110-billion-euro rescue package to keep Greece from a debt default and end a crisis that has rocked the single currency and rattled world markets.

In return for the emergency loans, the Greek Socialist government agreed to implement draconian spending cuts and tax increases to bring its public deficit down from 13.6 percent to under 3.0 percent by 2014.

Asian shares were also down, with Hong Kong ending the day 1.41 percent lower and Sydney shedding 0.46 percent. Tokyo was closed for a holiday.

Shares were down in Spain and Portugal, countries with high public deficits that are considered the most threatened by contagion from the crisis in Greece.

The Madrid stock exchange was down 0.83 percent while shares in Lisbon fell slightly by 0.04 percent. Athens was up, however, gaining 0.03 percent.

The borrowing costs of Spain rose as the interest rate demanded by investors to hold its 10-year bonds rose to 4.052 percent from 4.032 percent late Friday.

The yield, or return, on Portuguese bonds eased, however, to 5.108 percent from 5.126 percent.

And the rate demanded for Greek bonds, which soared above 11 percent last week, fell further to 8.614 percent. The punitive rates demanded by the markets were what forced Greece to go cap in hand to its European Union partners and the IMF.

At Barclays Capital, analysts expressed concern that the conditions for the rescue aid might not be approved by parliaments in contributing eurozone countries.

The IMF could begin transferring funds without the approval of eurozone parliaments, but that did not remove uncertainty about the final total amount and this was weighing on the euro, they said.

Investors were also concerned about regional elections in Germany on May 9, two days after the date on which the German federal parliament is due to adopt the rescue package.

But other analysts said the German legislature would inevitably pass the deal despite deep reservations among lawmakers.

Even if Greece gets the entire rescue package, Golman Sachs economist Erik Nielsen estimates that the country’s funding needs are much higher.

“I maintain my estimate that the total financing requirement will be about 150 billion euros over the next three years, so this means that the programme will not be fully financed throughout,” Nielsen said.

At Dutch bank ING, interest rate strategist Padhraic Garvey said “the issue now is whether the 110 billion package is enough.”

He said that the “bottom line” was that “if Greece spent the lot on upcoming redemptions, coupons (interest payments) and deficit financing there would not be a whole lot left heading into 2012.”

He added: “This gives Greece an effective window of 18-24 months, or effectively half to two-thirds of the so-called three-year programme.”

Source: SGGP

Eurozone set to endorse Greek bailout plan Sunday

In Uncategorized on May 3, 2010 at 8:33 am

 Debt-laden Greece‘s eurozone partners are set to endorse a multi-billion euro emergency bailout package on Sunday, after six months of fraught negotiations marked by German reticence.

Rioting in Greece Saturday over tough government belt-tightening piled the pressure on the 15 other countries that use the euro currency to release the rescue funds in a joint deal with the International Monetary Fund.

German Chancellor Angela Merkel however has insisted that this help can’t be unconditional, so the desperately needed loans of up to 120 billion euros (160 billion dollars) will be offered in return for more deep cuts in spending and tax rises.

The EU and the International Monetary Fund have asked for Greece to slice 10 percentage points off a public deficit that ballooned to 13.6 percent of output in 2009, according to a German union official.

A demonstrator tries to avoid a petrol bomb during clashes between police and demonstrators in central Athens.

A Greek finance ministry source said the deal was finally concluded on Saturday evening after round-the-clock talks in Athens with the European Commission and the IMF.

The cabinet of Prime Minister George Papandreou was due to meet at 9:30 am (0630 GMT) Sunday to announce the deal live on television, a Greek government source told AFP.

Then at 4:00 pm (1400 GMT) in Brussels, the 16 eurozone finance ministers will meet, hoping to formally back the plan.

The sprint to the finish is not only a bid to save Greece from defaulting on its loans but also to ward off speculators, who have begun to stalk other weak eurozone economies, especially Portugal and Spain.

The aim of the special meeting in Brussels is to greenlight three years worth of loans to Greece, two thirds of which were to come from euro partners with the remainder from the IMF.

After the finance ministers back the deal, the plan may still go to euro country heads of government and state — the German parliament, for example, would have to approve it.

Only then could the money can be physically transferred to Athens.

Greece has warned it is in danger of defaulting on its debts if markets are allowed to sustain their attacks in the run-up to a critical May 19 deadline.

Germany appeared to soften its resistance to a bailout over the past week as the interest Greece has to pay to raise funds shot up to a punitive 10 percent — twice the five-percent rate expected to be on offer from the EU.

The final deal will force fresh budget cuts on Greece through until 2012, as well as broader structural reforms to its overall economy, described by the European Commission as “fundamental.”

Source: SGGP