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Eurozone finance ministers look for way to end Ireland's debt crisis

European finance ministers meet in Brussels on Tuesday to search for a solution to the eurozone's latest problem child. Ireland has sunk to weakest-link status, but Dublin is still refusing to request a bailout.

An Irish-minted euro coin

Eurozone ministers fear Ireland's debt crisis could spread

Eurozone finance ministers are gathering in Brussels on Tuesday to search for solutions to Ireland's and Portugal's debt crises, with the two countries facing mounting pressure to make formal requests for bailouts.

Ireland's coalition government has held off on asking for a bailout that many are calling inevitable. It was faced with 130 billion euros ($177 billion) in outstanding European Central Bank loans last month - as well as a deficit set to hit 32 percent of gross domestic product this year.

No request yet

Ireland admitted on Monday that it was holding talks with the European Union - under pressure from Germany and the European Central Bank - about the possibility of an emergency aid package. Yet, while some sources said figures from 45 to 90 billion euros were being discussed, both Irish and EU officials stressed that no bailout request had yet been made.

"Ireland is making no application for the funding of the state because clearly we are pre-funded right up to the middle of next year," Prime Minister Brian Cowen told Ireland's RTE public radio.

Meanwhile, Luxembourg's Prime Minister Jean-Claude Juncker, who is also the president of the Eurogroup of finance ministers, said that the eurozone was ready to act "as soon as possible" if Ireland sought financial assistance.

But he stressed that "Ireland has not put forward their request," and added, "As long as they don't, we are not supposed to deal with a theoretical request."

Irish Prime Minister Brian Cowen

Cowen says Ireland will be just fine for another year

Under pressure

Ewald Nowotny, a member of the European Central Bank's governing council, said the European Union wanted a "quick, good solution to Ireland, so that there would be no spill-over" to other heavily indebted countries such as Portugal and Spain.

Ireland has come under pressure from eurozone leaders, who fear the country's debt crisis could bring down the rest of the bloc. Debt is widespread in the eurozone and the EU, but Ireland is currently seen as the weakest link.

Portugal also in trouble

Meanwhile, Portugal, which is already unable to borrow money on open markets other than at prohibitive rates, admitted on Monday it was in difficulty, but Portuguese Finance Minister Fernando Teixeira dos Santos said there were no plans as of yet for Lisbon to request emergency funding.

At their monthly meeting in Brussels, the eurozone finance ministers are also expected to discuss the future eurozone crisis resolution mechanism, which Germany wants to start from 2013, replacing the 440-billion-euro European Financial Stability Facility set up after Greece sought help in May.

The ministers are also expected to praise Ireland's 2011 budget cuts, which face a parliamentary vote of approval next month. Meanwhile, in Ireland, Finance Minister Brian Lenihan is expected to release details of a new four-year debt-cutting program before the end of the month.

Author: Christoph Hasselbach, David Levitz (AFP, Reuters)

Editor: Chuck Penfold

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