Finance ministers from the 16-member zone that shares the euro currency are meeting Tuesday in Brussels to figure out how to help debt-strapped Ireland, and avoid chances Dublin's fiscal problems will spread elsewhere.
Earlier this year, the Europe Union's financial worries were centered on Greece and fears that its debt and deficit problems could infect other financially vulnerable members. Today, Ireland is in the spotlight during a two-day meeting of EU finance ministers in Brussels. Dublin is struggling with a public deficit expected to be more than 30 percent higher than its gross domestic product this year. That is roughly 10 times more than the cap set for the 16 members of the eurozone, and three times more than Greece's deficit. While Athens received a $150-billion rescue package, though, the Irish government has not sought a state bailout, although it has suggested it may ask for help for Irish banks. Meanwhile, yields or interest rates for Ireland's bonds have soared during the past week, driving down the value of the bonds. Analysts say other financially struggling EU members - like Portugal and Spain - also will find it harder and more expensive to borrow to finance their debts. That is why some analysts fear that, without help, Ireland's fiscal problems could spread.
In remarks to reporters last week, European Commission chief Jose Manuel Barroso sought to calm the concerns. "What is important to know is that we have all the necessary instruments in place now in the European Union and the Eurozone to act, if necessary," said Barroso. "But I am not going to make any kind of speculation. What is important is, of course, to support the very important efforts the Irish authorities are implementing. At the same time, we can reiterate that the European Union is ready to support Ireland."On Monday, Portugal's finance minister warned that the Irish situation was a danger for other Eurozone members. Like Ireland, Portugal's bond yields also have risen sharply recently. Portugal's budget deficit is nine percent of its GDP, three times the Eurozone limit. |