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News : Irish Economy Last Updated: Nov 22, 2010 - 4:10:03 AM

Ireland to request rescue bailout after talks with European Commission, the International Monetary Fund and the European Central Bank
By Finfacts Team
Nov 21, 2010 - 1:55:37 PM

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The Minister for Finance Brian Lenihan and Olli Rehn, EU Economic and Monetary Affairs Commissioner at a press conference in the Department of Finance, Nov 08, 2010

The Minister for Finance today confirmed that Ireland has agreed to request a rescue bailout after talks with officials from the European Commission on behalf of the EU, the International Monetary Fund (IMF) and the European Central Bank (ECB).

In an interview on RTÉ radio's This Week programme, Brian Lenihan said he would  propose the application for assistance this afternoon's meeting of the Cabinet.

Lenihan said discussions with the agencies had concluded Saturday evening.

After the expected approval of the Cabinet, Ireland would now be formally apply for a rescue programme and formal negotiations will begin on the support for the banking sector and what conditions the IMF will set in areas of overdue reform and public spending.

The Cabinet is also due to agree on a four-year plan to reduce the annual budget deficit to 3% of GDP (gross domestic product) by 2014.

Officials from the European Commission have been working with Irish officials on the plan in recent weeks.

The plan is expected to be published in the next week and it will set out the details a planned fiscal adjustment of taxes and spending cuts of €15bn in the period 2011-2014.

Officials from the IMF, EC and ECB arrived in Dublin on Thursday following bare-faced lying by senior ministers that any discussions were taking place.

European commissioner for economic and monetary affairs, Olli Rehn, had said on Wednesday after a meeting of the Ecofin council of EU27 finance ministers that that any possible aid plan to Ireland would be "country program," not direct lending to the banking sector.

"They can only do so through a country program, but one with a special emphasis on strengthening the banking sector," he said.

Rehn said technical talks between the EU and the Irish government will focus on two areas, one is on the four-year budget-cutting plan and the 2011 budget, the other is on state of the Irish banking sector and the need for restructuring.

“In this kind of a programme you have always fiscal and economic conditions, which would be based on the four-year fiscal plan and next year’s budget,” he said. “They are by and large in line with revised stability programme of Ireland and we endorse these objectives.

On the other side, there is the question of the restructuring of the banking sector and there the obvious goal is that the Irish banking sector has to be made viable and sustainable, which will require quite some reorganisation and restructuring in that particular area."

Ireland won’t be required to raise its corporate tax rate as part of a European Union bailout, French President Nicolas Sarkozy said on Saturday.

“When you have to tackle a deficit, you have two levers, spending and taxes,” Sarkozy said in Lisbon where he was attending a summit of NATO leaders.
“I can’t believe that our Irish friends, in full sovereignty, won’t look at both since they have more room for maneuver given that their tax rates are lower. But that’s not a demand or a condition, just an opinion.”

Ireland could have the option of rising the corporate tax for domestic companies and retaining teh tax rate of 12.5% for exporting firms.

Meanwhile, the Red C poll for the Sunday Business Post shows Fianna Fáil has dropped one point to 17% - -  another record low for the party in a Red C poll.

Support for Fine Gael is up one to 33%, Labour is unchanged at 27%, the Greens drop one to 3%, while Sinn Féin support is up two points to 11% - the party's best Red C result in 18 months.

Lenihan audio clip

Brian Cowen - - Ireland's Herbert Hoover in denial to the last as curtain falls on the Age of the Irish Scrounger

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