IMF Managing Director Dominique Strauss-Kahn said yesterday that he believed Ireland was abler to manage its fiscal affairs well, and the Fund has received no request for aid.
“I have not been in contact with Ireland,” he told reporters on the sidelines of an Asia-Pacific summit in Yokohama, Japan. “So far I have not had a request, and I think Ireland can manage well.”
He said the IMF would be willing to help Ireland if needed assistance in the future, but “until now it’s business as usual.”
Ireland is in talks about tapping emergency funds from the European Financial Stability Facility, eurozone sources said on Friday, but Ireland said it had not formally applied for any EU aid.
Chairman of the group of euro zone finance ministers Jean-Claude Juncker said on Friday that the EU was following the situation in Ireland very closely but there was no immediate reason to think the country would ask for aid.
Strauss-Kahn said he, too, was unaware of talks about an EU bailout for Ireland.
Irish borrowing costs shot to record highs this week over concern about the country’s ability to reduce a public debt burden swollen by bank bailouts and worries that private bond holders could be forced to shoulder part of the costs of any bailout by taking “haircuts” on their holdings.
Government officials in Dublin have denied repeatedly that they plan to tap EU funds, and an Irish finance ministry spokesman said there were “no talks on an application for emergency funding from the European Union.”
However, Eurozone sources have said aid discussions are under way. One official said it was “very likely” that Ireland would get financial assistance from the EU facility set up after Greece obtained a 110 billion euro bailout in May.
“Talks are ongoing and European Financial Stability Facility (EFSF) money will be used; there will be no haircuts or restructuring or anything of the kind,” one eurozone source said. A second source confirmed the talks.
Pressure on Irish bonds eased on Friday after France, Germany, Italy, Spain and Britain, issued a statement confirming that holders of existing euro debt would not take a hit if the EU proceeded with plans to introduce a mechanism letting countries restructure their debt.
That sent a wave of relief through markets fearing that the eurozone could be headed toward another debt crisis following the one with Greece earlier this year.
Strauss-Kahn said Ireland’s difficulties were very different to those faced by Greece.
“The Irish situation is mostly linked to the problem of the banks, especially one big bank, not only one, but mostly one big bank. It’s not the same thing as the Greece problem, which was at the same time a fiscal problem but also a competitiveness problem.”
The Irish government has “taken a lot of measures to get back on track on the fiscal side,” he said.
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