Business

Ireland: The big bailout is a done deal (almost)

BBC business editor Robert Peston on Irish banking.

Ireland's government is now surrounded.

Its European Union partners want it to accept a substantial rescue loan from the EU and International Monetary Fund - which is likely to include some kind of participation from the UK.

The European Central Bank is urging such a rescue, so that some kind of confidence of commercial lenders can be restored in Ireland's banks - which would help Ireland's banks to begin to repay the £110bn odd they've borrowed in emergency liquidity from the ECB.

Ireland's central bank governor, Patrick Honohan, has this morning said that such a loan, running to tens of billions of euros, is very likely to be accepted.

All of which means that Ireland's taoiseach and finance minister no longer have any room for manoeuvre (some would argue).

Can you imagine circumstances in which the Irish government, whose grip on office is not seen as particularly firm, could go against the urgings and advice of those states and institutions that are the last defence for Ireland against the perception that it is bust?

As I and my colleague Stephanie Flanders have written many times over many months, Ireland has borrowed more than was remotely prudent - some 700% of GDP, when bank debt, state debt, household debt and corporate debt is aggregated.

If Ireland's creditors, many of which have been pulling out their money from Ireland's banks as fast as they can in recent months, are to be reassured that they don't have to demand the rest back - with potentially devastating consequences both for Ireland and the financial integrity of the eurozone - the implicit financial support for Ireland of Germany, France, the UK and other states has to be turned into explicit support. And soon.‬‪

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

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