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Business

Ireland, Portugal and Greece worry eurozone ahead of talks

Text by News Wires

Latest update : 2010-11-15

As finance ministers from the 16 countries that share the euro prepare for tense talks about eurozone stability on Tuesday, the financial woes of Ireland, Portugal and Greece remain a concern.

AFP - Struggling Ireland, Portugal and Greece tipped debt-riddled Europe dangerously close to the edge Monday, going into crunch EU talks among nations warily looking over their shoulders.
  
On the eve of tense discussions among the 16 countries that share the euro, Dublin confirmed it was in talks with partners over its huge budget problems, Portugal admitted it too was at "high risk" and new figures showed already bailed-out Greece's deficit getting worse.
  
Ireland, while denying that it would follow Greece and apply for emergency loans, said it was in contact with "international colleagues" amid speculation of an imminent rescue.
  
Jean-Claude Juncker, head of the Eurogroup of finance ministers, said the eurozone was indeed ready to act "as soon as possible" if Ireland sought financial assistance.
  
But he stressed that "Ireland has not put forward their request."
  
"As long as they don't, we are not supposed to deal with a theoretical request."
  
The European Union's executive commission meanwhile said Ireland's problems were a concern for the financial stability of the eurozone, while rejecting rumours of concrete preparations for any bailout.
  
Portuguese Finance Minister Fernando Teixeira dos Santos warned that "contagion" was spreading like wildfire, warning no one could feel totally safe. Twenty-four of the EU's 27 states are currently running deficits way above a permitted three percent of Gross Domestic Product limit.
  
Developments took a turn for the worse earlier when auditors from the European Union evised Greece's public deficit for 2009 up to 15.4 percent of gross domestic product, a big jump from the already massive 13.6 percent announced in April.
  
Irish and Portuguese bond yields, after rising early in the day, later narrowed on comments at a G20 summit last week from key EU finance ministers that bond market jitters over a future European bailout fund were misplaced.
  
Greek bond yields by contrast widened following an upward revision to the country's 2010 deficit projections.
  
Amid the speculation, the euro was dragged down at the start of a crucial week during which Portugal, another beleaguered eurozone member, will attempt to push through its austerity budget.
  
"The risk is high because we are not facing only a national or country problem," Teixeira dos Santos was quoted as saying by the Financial Times.
  
Earlier, he had warned that Ireland must take the wider eurozone's needs into consideration when it decides whether to seek a rescue or not.
  
"I would not want to lecture the Irish government," he told Dow Jones Newswires. However, "I want to believe they will decide to do what is most appropriate together for Ireland and the euro."
  
Irish government bond yields -- the rate paid to investors -- shot through the roof last week, and the yield on bonds issued by Portugal and Greece also rose Monday, leaving UBS analysts to openly wonder: "Is Portugal next?"
  
"The question is to know if an appeal for European aid will calm matters or instead be grist for the mill," said Natixis bond strategist Jean-Francois Robin.
  
Recent develops have driven intense speculation over a possible rescue for Ireland running to about 70 billion euros (96 billion dollars).
  
Ireland is in deep trouble mainly because of the costs of a huge crisis in its banking system, in turn the result of the banks' massive over-exposure to the busted property markets.
  
The Irish public deficit this year is set to pass 30 percent of GDP, 10 times the EU limit and double even the massive Greek deficit.
  
An EU source told AFP that the bloc is "ready to go as far as the maximum option, if needed."
  
The deputy president of the European Central Bank, Vitor Constancio, said "we stand ready" but stressed that "if and when Ireland applies for help is a matter solely for the Irish government."
  
The pattern resembles the build-up in the spring to a 110-billion-euro  EU-International Monetary Fund bailout of Greece.
  
"Ongoing contacts continue at official level with international colleagues in light of current market conditions," an Irish finance ministry spokesman said.
  
Amadeu Altafaj Tardio, a European Commission spokesman, said Brussels remained in "close contact" with Dublin, citing "concerns in the euro area about the financial stability of the euro area as a whole."

Date created : 2010-11-15

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