STEVE INSKEEP, Host:
Ireland's debt crisis is at the top of NPR's business news this morning.
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INSKEEP: Hi, Phil.
PHILIP REEVES: Hi.
INSKEEP: Does this - is this heading toward a bailout for Ireland?
REEVES: Well, it's to lay the ground for some sort of package of assistance. This team comes from the International Monetary Fund, the European Union and the European Central Bank, and they're coming here to have a good long look at the books. The banks here, which are mostly state owned, are in deep trouble. No one wants to lend to them, so they've become increasingly dependent on funding from the European Central Bank. A few weeks ago, the government said the banks needed bailing out to the tune of nearly $70 billion. And remember, this country's only got four and a half million people in it. Now, that number has kept on growing, that debt has kept on swelling, thanks to deposit outflows, rising mortgage arrears, and so on. The biggest lender here, the Bank of Ireland, saw outflows of nearly $14 billion in less than two months this summer.
INSKEEP: You said the Irish government said that they're $70 billion short. They need that much money to come from somewhere, and that was some time ago. What do they want to happen now?
REEVES: Well, it's under a hell of a lot of pressure from around Europe to accept rescue funds because it's been destabilizing the euro zone, and some say even threatening the future of the European Union. But the Irish say that they aren't asking for assistance. The government's describing today's talks not as negotiations for a bailout, but what they call sensible precautionary discussions. The fact remains, though, that the government simply can't afford to go on propping up its banks. Now, this has significant implications elsewhere also. The British are not in the euro zone but they are very exposed to the Irish banking sector, to the tune of an estimated $150 billion, which is one reason why they're also offering to help bilaterally.
INSKEEP: Okay. Are sensible precautionary discussions reassuring the bond markets?
REEVES: Well, you know, there's a serious loss of confidence in debt in the euro zone. The government here is saying that it does have enough money, by the way, in its coffers to last until well into next year, so it doesn't need to go to the markets to borrow for its budget. If it did, though, it couldn't afford to. Interest rates for Irish bonds have been driven up to around eight percent. That panic's pushing up borrowing costs for other deficit-laden nations like Portugal, Spain. Now, this market - these markets have a long history of overreacting. But until the Irish formally ask for assistance, the panic is likely to carry on and so will this discussion about where the euro zone is actually going.
INSKEEP: Philip Reeves in Dublin, when you get away from government officials and bond traders, how are people in Ireland responding to the possibility of a bailout?
REEVES: Oh, Steve, this is a really sensitive issue here. You know, taking a European bailout is perceived by some Irish people, you know, as a loss of sovereignty. This is actually reflected in a very interesting editorial this morning in the Irish Times. It's headlined: Was it for this? Having obtained our political independence from Britain - that's in the last century - to be masters of our own affairs, we've now surrendered our sovereignty to the European Commission. But there's a great deal of anger - public anger - directed against the government. People feel it's been secretive, highly misleading. And on the other hand, the economy's in deep trouble. There are some people here - plenty of them, actually - who are considering or actually are emigrating in droves, and a lot of folk will settle for anything that puts this economy back on the road to prosperity.
INSKEEP: Phil, thanks very much.
REEVES: You're welcome. Transcript provided by NPR, Copyright NPR.
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