Eurozone finance ministers gird themselves as Irish situation deteriorates
Ireland's widening debt crisis has stolen the attention of premiers and presidents at the Group of 20 meeting in Seoul following a sell-off of Irish debt, with German, French and UK leaders holding a hastily called pow-wow to discuss the issue.
Finance ministers from the big three EU powers are expected to issue a joint communique on Friday (12 November) with the aim of calming investors, according to German officials.
The yield on the Irish 10-year bond climbed to 9.26 percent on Thursday, up from 8.639 percent the day before, an all-time high since the launch of the euro in 1999, giving a yawning yield spread with 10-year German Bunds of 6.8 percentage points.
The big three statement will likely make a reference to plans agreed two weeks ago at the EU summit in Brussels for a permanent eurozone bail-out fund for troubled economies.
Meanwhile, eurozone leaders appear to be laying the groundwork for a call by Ireland on the area's existing €440 billion temporary bail-out fund.
Finance ministers from eurozone countries at their regular monthly meeting next Tuesday in Brussels will discuss the Irish situation and how the fund can be activated should Dublin throw in the towel and call for a rescue.
The Irish Times is reporting informal contacts amongst European capitals on their ability to set the fund into motion should Dublin move in this direction.
However, Irish government sources on Thursday stressed that no such application will be made, with similar denials coming from the chairman of the eurozone group of countries, Luxembourgish Prime Minister Jean-Claude Juncker.
In the case that Ireland were to apply for funds from the European Financial Stability Fund, Dublin would first notify Mr Juncker and the eurogroup. Mr Juncker's spokesman on Thursday said no such contacts have been made.
Meanwhile, the contagion appears to be spreading to Portugal, Spain and Italy, with the premium on the debt of all three countries climbing to record levels.
On Thursday, the Spanish statistics office reported that the economy had seen no growth in the third quarter while Greek Prime Minister George Papandreou acknowledged that his government is unlikely to meet public deficit targets for this year and agreed to between Athens, the EU and the IMF in return for a €110 rescue earlier this year.
[Source: By Leigh Phillips, Euobserver, Brussels, 12Nov10]
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