Time To Deliver The Death Blow!

Ireland's debt crisis could kill the European Union stone dead, EU president warns


The debt crisis facing Ireland, Greece and Portugal could threaten the future of the whole European Union, EU President Herman Van Rompuy warned today.

'We must all work together in order to survive with the eurozone, because if we do not survive with the eurozone, we will not survive with the European Union,' said Mr Van Rompuy.

He spoke out as finance ministers tried to keep Ireland's market turmoil from triggering a domino effect that could topple other vulnerable nations and rock the region's currency union.

Only months after saving Greece from bankruptcy in May, the 16-country eurozone has been shaken by concerns that Ireland will be unable to sustain the cost of its banks' failure.

European nations are worried the tension is making borrowing more expensive for countries like Portugal and Spain, threatening to push them to the brink of default.
Stifling the contagion - a market panic that jumps from one weak country to the next - is the priority.

Behind Ireland stands Portugal, one of the eurozone's smaller member with 1.8 per cent of its economy but one that is considered by some to have done less than the Irish to bring debt and deficits back under control.

Next comes Spain, with a proportionally smaller debt burden but a dead-in-the-water economy that is so big - 11.7 per cent of eurozone output - that it could present a much larger challenge if it needs help.

Rates on Irish bonds rose again today as investors' expectations ebbed for an early decision on an Irish bailout - which would be expected to guarantee they will get paid back on their holdings.

The yield on 10-year Irish treasuries rose to 8.16 per cent from Monday's closing yield of 7.94 per cent.

Ireland's minister for European affairs, Dick Roche, concedes that Irish banks are having trouble drumming up operating cash, but insists no bailout agreement is in store.

He suggested that others in the EU were panicking over how to manage Ireland's £49 billion bank-bailout bill and its deficit, which is forecast to reach a staggering 32 per cent of GDP this year, a record for post-war Europe.

'I would hope that after the meeting this afternoon and tomorrow there would be more logic introduced to this. There's no reason why we should trigger an IMF or an EU-type bailout,' Roche said.

'There is a problem with liquidity in banks, but I don't think the appropriate response to that would be for European finance ministers to panic.

Analysts suggested that Ireland should cut a deal now with EU colleagues and not wait until next year, when the country could rapidly reach the edge of bankruptcy.

Ireland says it has sufficient cash to fund government services through June 2011, and has postponed returning to the bond market until early 2011 in hopes that the interest rate demanded by investors will have fallen by then.

Ireland has already nationalised three banks - Anglo Irish, Irish Nationwide and the Educational Building Society - and has taken major stakes in Allied Irish Banks and Bank of Ireland.

Allied Irish is expected to fall under majority state control within weeks.

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