The Euro has fallen against the dollar and major European markets have dropped sharply, a day after ministers agreed a bail-out for the Irish Republic. On Sunday, European ministers reached agreement over a bail-out worth about 85bn Euros.
European ministers reached Sunday an agreement over a bail-out for the Irish Republic worth about 85 billion Euros. The deal will see 35bn euros go towards propping up the Irish banking system with the remaining 50bn euros to help the government's day-to-day spending.
The Irish government has unveiled a range of tough austerity measures designed to help solve the country's debt crisis. Among the spending cuts and tax rises are a reduction in the minimum wage, a new property tax and thousands of public sector job cuts.
Irish Prime Minister Brian Cowen defied mounting pressure to quit and announced Monday he would stay in office until parliament passed an austerity budget needed to secure an IMF/EU bailout and then call an early election.
Ireland became the second Euro country to seek a rescue as the cost of saving its banks threatened a rerun of the Greek debt crisis that destabilized the currency. The Euro rose and European bond risk fell Monday following the announcement of the package.
Ireland's banking problems are likely to have a direct effect on the United Kingdom's battered institutions. According to the Bank of International Settlements, UK banks have a total exposure to Irish lenders of 222 billion US dollars (£139bn).
Emergency talks were being held in Dublin overnight as fears about Ireland’s ailing banking system forced the deployment of a team from the European Union, the International Monetary Fund and the European Central Bank.
German Chancellor Angela Merkel said the Euro is the glue that holds Europe together, signalling that an Irish bailout may be the price of preserving European unity.
Irish Finance minister Brian Lenihan has welcomed a statement of support over Ireland's debts from Germany, Britain, France, Italy and Spain. The five countries attending the G20 summit in South Korea said that bondholders would not be forced to share the pain of the current debt crisis.
Risk rating agency Moody’s cut on Monday Ireland's credit rating, warning the country faces a slow climb out of recession as the cost of a rescue of its banking sector mounts.