Ireland on Brink of Collapse as EU and IMF Bailout Imposed

Strategic Insights -

The Irish government faced collapse Monday after accepting a massive bailout from the European Union and the International Monetary Fund. Prime Minister Brian Cowen announced that an election would be called for early next year, contingent on passing an emergency budget and finalizing the bailout. The move marked a significant blow to Cowen, who had previously denied the need for a bailout to address the consequences of Irish banks' reckless speculation in real estate. His coalition partner, the Green Party, forced his hand, threatening to quit the government and demand an election in January.

Key Takeaways:

  • The Irish government accepted a massive bailout from the European Union and the International Monetary Fund, worth approximately $135 billion (euro100 billion).
  • Prime Minister Brian Cowen announced that an election would be called for early next year, contingent on passing an emergency budget and finalizing the bailout.
  • Cowen faces an uphill struggle in passing the 2011 budget, with an initial vote scheduled for December 7.
  • The bailout is the European Union's latest attempt to maintain market confidence and keep the euro currency strong and stable.
  • Experts believe the bailout will do little to shield other heavily indebted countries from the risk of default, including Portugal and potentially Spain, Italy, and Greece.
  • The Irish government has agreed to prune, merge, and possibly sell off its six banks, which are heavily dependent on loans from the European Central Bank.

Statistics:

  • The bailout is worth approximately $135 billion (euro100 billion).
  • The 2011 budget is expected to be the most brutal in Irish history.
  • The initial vote on the budget is scheduled for December 7.
  • The bailout is the European Union's latest attempt to maintain market confidence and keep the euro currency strong and stable.
  • 5 of Ireland's 6 banks are nationalized or part-owned by the state.

Sources:

  • SHAWN POGATCHNIK, Associated Press, "Irish government faces collapse as EU and IMF bailout imposed"
  • European Union
  • International Monetary Fund
  • European Central Bank
  • Associated Press, "Irish Banks to Be Trimming, Merging and Possibly Sold"