Ireland’s Prime Minister, Brian Cowen, announced last night that his Government has made a formal request for an emergency bailout.
In the euro zone’s second emergency rescue this year, Ireland will receive between €80 and €90 billion but the country’s finance minister, Brian Lenihan, said a precise figure has not been determined.
The loan will come from the EU rescue fund, which was established by European Governments and the International Monetary Fund (IMF) after the Greek debt crisis earlier this year.
Greece was the recipient of €110 billion bailout in May.
In the meantime, the UK will help with the bailout after UK Chancellor George Osborne said “it’s in our national interests” that we help Ireland and Mr Osborne confirmed that Britain would have to foot a bill of around £7 billion.
The bailout comes despite Ireland’s Government denying claims that it would accept emergency funding, insisting it was fully funded until at least the middle of next year.
However, emergency conference calls over the weekend involving G7 partners in the US, Japan and Canada clinched the deal.
Following the news of the bailout, Asian stock markets rose today, while the euro was up against the dollar.
Since the credit crunch three years ago, Ireland’s public finances have been battered by having to prop up the banking sector, a collapse in its property market and one of the worst recessions in the euro zone.
The former “Celtic Tiger” economy is also battling a deficit of more than £16 billion and the Irish Government is introducing tough austerity measures – something which many fellow euro zone nations have implemented.
It is aiming to save €15 billion (£13 billion) between 2011 and the end of 2014.
However, like many other nations, the savings are likely to cause protests and trade unions have already warned of “civil unrest”.
There are also plans to cut the minimum wage by one euro to €7.65 (£6.55).