The head of Ireland's central bank has said the country will likely receive a multi-billion-euro loan to help save the country from financial meltdown. This comes as an EU/IMF mission is in Dublin for emergency talks.
An EU/IMF bailout is on the Irish horizon
The governor of Ireland's central bank said on Thursday that he expected Dublin to accept tens of billions of euros in loans from European partners and the IMF to shore up its indebted banking sector.
Patrick Honohan made the comments as a joint mission of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) began talks in Dublin on a possible rescue package.
Honohan: the loan could be worth tens of billions of euros
"The intention is and the expectation is, on their part and personally on my part, that negotiations or discussions will be effective and a loan will be made available and drawn down as necessary," Honohan told Irish state broadcaster RTE.
"We're talking about a very substantial loan for sure - tens of billions, yes," Honohan said, acknowledging that there had been substantial outflows of funds from the Irish banking sector since April.
But Finance Minister Brian Lenihan played down expectations of an imminent bailout, saying Ireland was not yet at the point of taking a substantial international loan.
In a move to calm the Irish people, Lenihan also said the government was extending an unlimited guarantee for depositors until the end of next year, six months longer than previously announced.
Markets rebound as bailout expectations arise
Meanwhile, following 10 consecutive days of losses, European markets and the euro rebounded on Thursday, banking on expectations Dublin would follow Athens in becoming the second eurozone member to accept an EU/IMF bailout package.
EU sources say Ireland may need assistance of between 45 billion and 90 billion euros ($61-122 billion), depending on whether it needs help only for its banks or for public debt as well.
In an indication of potentially tough negotiations ahead, France said Ireland may have to raise its ultra-low 12.5 percent corporation tax rate - a taboo in Irish politics - in return for the assistance package.
ECB calls for 'quantum leap' in economic governance
However, while market fears may have been dampened, the head of the European Central Bank expressed "grave concerns" about economic governance in the eurozone.
Trichet: the eurozone is in great need of governance
Speaking at a central banking conference in Frankfurt, Jean-Claude Trichet bemoaned the weakening of the Stability and Growth Pact - which seeks to limit the budget deficits of EU member states to 3 percent of GDP - and called for "quantum leap" in economic governance in an "exceptionally demanding and uncertain" environment.
As of yet, no details have emerged from the Dublin talks, with a spokeswoman for the IMF declining to comment on "hypothetical" questions about how much aid Ireland might need or how an aid package could be structured.
She said the IMF mission was working together with its European partners "to assess what may need to be done to assure financial stability."
Author: Gabriel Borrud (Reuters, dpa)
Editor: Rob Turner