European finance ministers agreed to Ireland’s request for a multi-billion euro bailout amid fears the debt-laden nation could spread contagion to weak euro economies.
Ireland becomes the second eurozone member to require a rescue. In May, European governments and the IMF agreed on an emergency loan package to prevent Greece from defaulting on its debts.
Ireland needed less than 100 billion Euros from the emergency fund of the euro countries and the IMF, which contains a total of 750 billion.
The money will be used as a credit line for its state-backed banks, which are losing deposits and struggling to borrow funds on open markets.
The exact terms are negotiated in the coming days. This is done by experts from the European Commission, the European Central Bank and the IMF.
Ireland has been brought to the brink of bankruptcy because of its 2008 decision to insure the nation’s banks against all losses — a bill that is swelling beyond euro50 billion and driving Ireland’s deficit into uncharted territory.
The Dutch Finance Minister pointed out that the financial support is in the form of government guarantees. “It will cost Dutch taxpayers nothing.”