Eurozone finance ministers had confirmed the request for funding to help resolve Ireland’s debt crisis minutes before the prime minister’s announcement.
Cowen did not reveal the precise amount of the fund to help bail- out Ireland’s banking system and safeguard the stability of the euro, but it is reported to be between 80-90 billion euros.
Speaking at a press conference in Dublin, Cowen said the “solidarity shown to Ireland by other countries should also be shown in Ireland.”
Ireland’s request marks the first time a eurozone country has requested aid from the special bail-out fund, created earlier this year to make sure that eurozone nations would not have to improvise assistance plans for nations with troubled economies, as was the case with the Greek bail-out last spring.
Cowen said that Ireland’s low corporation tax rates, which have come under fire as unfair competition within the EU, would not be changed as part of the deal.
Finance Minister Brian Lenihan said Europe “stood fully with Ireland in relation to the eurozone.” He said the loan period had not been determined, although normal programmes applied over three years.
Cowen said the programme of aid for Ireland would involve a fund for the provision of capital needs, restructuring of the banks and a programme for reducing the budget deficit.
Lenihan said Ireland’s options had been narrowly circumscribed since 2008 and the government had acted appropriately.
He said a clear option now was to look at bank assets – the vast part of the banks now being in public ownership – and to see what assets could be disposed off.
Conceding that Ireland’s debt problems had become “too big” for the country, Lehihan announced earlier Sunday that the country would apply for a financial rescue package from the EU, the International Monetary Fund (IMF) and the European Central Bank (ECB).
Ireland has been under pressure for over a week to accept an EU/IMF bailout to help solve its debt crisis.
Following the late Sunday announcement, IMF managing director Dominique Strauss-Kahn said we welcomed the EU response to Ireland’s request for assistance.
“The IMF stands ready to join this effort, including through a multi-year loan,” he said, adding that an IMF team, currently in Ireland, will now hold talks on an economic programme with the Irish authorities, European Commission and ECB.
A 45-billion-euro government (61.6-billion-dollar) bail-out of Ireland’s shaky banking sector sent the public deficit this year to a staggering 32 per cent of gross domestic product.
Lenihan said earlier Sunday the ECB was behind the Irish banking system and capital was needed to ensure the Irish banks had “firepower.”
But, he said banks had to be “weaned” away from central bank funding.
The amount of interest being charged was subject to negotiation but it would be “a lot less” that Ireland would have paid on the international markets.
Lenihan also said the minimum wage would have to be looked at as a way to boost government revenues.
The cabinet has approved a 160-page austerity plan for how Ireland will cut spending by 15 billion euros between now and the end of 2014.
The political fallout of the debt crisis is intensifying, with repeated calls for the resignation of Cowen, who heads the deeply unpopular Fianna Fail/Green coalition government.