Ireland became the second country to seek a bailout euro

Ireland became the second country to seek a bailout euro and the cost to save their banks threatened with a repetition of the Greek debt crisis that destabilized the currency. The euro rose and fell in European bond risk.

A package that Goldman Sachs Group Inc. estimates may total 95 million euros (130 billion) to damp speculation that no Portugal and Spain would need to tap the emergency fund set up by the European Union and the International Monetary Fund after the rescue of Greece.

"The speculative actions against Portugal and Spain are not justified, although they may," said Luxembourg Prime Minister Jean-Claude Juncker, today in Luxembourg RTL radio. "At a time when financial markets have an excessive tendency to punish those countries that did not stick 100 percent to an Orthodox consolidation, you can never rule out that something similar will happen."

The aid, which the Irish authorities, said recently, in November 15 that did not need, marks the latest blow to an economy more than doubled in the decade ending in 2006. The real estate bubble burst in 2008 plunged the country into recession and banks brought to the brink of collapse. With yields of Ireland, near a record, policy makers are trying to prevent the crisis from spreading.

"Clearly, given the size of their loan portfolios, the huge risks they took, became a threat not only to the state but to the" euro region, Lenihan told RTE radio in Dublin, in an interview today. "The banks will be reduced to the real needs of the Irish economy" to "consumers in Ireland and Irish companies. That has to be the main focus of the Irish banks."

Capital Bank

Ireland part of the aid channeled to lenders through a fund of "quota" of capital, Finance Minister Brian Lenihan said.

The euro rose 0.5 percent to $ 1.3740 at 10:30 pm in London. Ireland to 10 years rose, sending the yield up 24 basis points to 8.11 percent. Ireland led a decline in the cost of insuring against debt default in Europe, according to traders of credit default swaps. The contracts of Irish government bonds fell 28.5 points to 478.5, its lowest level since 29 October, according to CMA data provider in London.

"Ireland had no choice," said Nicholas Stamenkovic, fixed income strategist in Edinburgh at RIA Capital Markets Ltd., a broker for money managers. "The market is still waiting for details of aid and conditionality, but there must be a relief rally."

The UK and Sweden can contribute bilateral loans, the EU said in a statement. Lenihan refused to say how big the package will be, saying that it will be less than 100 million euros. Goldman Sachs, chief European economist Erik Nielsen said yesterday that the government needs € 65000000000 funds itself for the next three years and 30 million euros for the banks.

Budget Cut

The talks will focus on government plans to reduce the deficit and restructuring the banking system, the EU said in a statement. The Irish Prime Minister Brian Cowen, speaking at the press conference as Lenihan said banks stress test. Ireland nationalized Anglo Irish Bank Corp. in 2009 and is preparing to take a controlling stake in Allied Irish Banks Plc, the second largest bank.

Lenihan and Cowen appeared minutes after the finance ministers issued a statement supporting a call for help to calm the markets. Allied Irish emphasized the fragility of the system on 19 November, reporting a decline of 17 per cent of deposits this year.

"In the short term, will stabilize the situation, no doubt about that," said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London, which considers a package of 80 million euros and 100 euros million dollars. "But as we saw in the case of Greece, uncertainty will remain."

Elections

Cowen is expected to announce the government's budget plan four years this week and said a deal with the EU and the IMF will come "in the coming weeks." Cowen, also faces an election in Donegal in northwest Ireland on 25 November to fill a vacant seat. The vote threatens to erode most Cowen. He has the support of 82 legislators, including independents, compared with 79 for the combined opposition.

The bailout follows two years of budget cuts not to restore market confidence as the cost to shore up the financial sector soared.

Lenihan cancels bond auction in October and November and announced € 6,000,000,000 austerity measures for 2011 on 4 November in a bid to restore investor confidence. These efforts after German Chancellor Angela Merkel, led to an exodus of investors saying that the bondholders should foot some of the bill in any future rescue.

Bond spreads

The risk premium on debt to 10 years in Ireland on German bonds, the European benchmark, fell to 523 basis points today. Widened to a record 652 basis points on November 11, with production reaching a record 9.1 percent. In 2007, it cost less from Ireland to Germany to borrow. Its differential at 10 years fell to a low of 77 basis points less than the levees. ISEQ stock index has fallen 70 percent since its record in 2007.

Ireland will be based on the fund of 750 million set by the EU and the IMF in May as part of the Greek rescue to protect the currency shared by 16 countries.

Irish officials initially resisted pressure from the EU to take any help, saying that will be funded in full until mid-2011. European leaders sought to spread the head of Ireland and reduce pressure on the European Central Bank to shore up lenders in the country, providing unlimited liquidity.

Cowen defended its investment in need of help. "I do not accept that I am the bogeyman," he said. "Now the circumstances have changed, we changed our policy."

The yields of Spain and Portugal have jumped amid concern that the precipitation of Ireland would be extended. The extra yield investors demand to hold Portuguese 10-year bonds rather than German bonds rose to a record 484 basis points on November 11.

"It may not stop the spread. The crisis of sovereignty is not over yet," said Sylvain Broyer, an economist chief euro-region Natixis in Frankfurt. "Ireland is in the midst of a difficult crisis."