European officials' meeting ends without bailout deal for Ireland

A newspaper seller’s sign Monday in Dublin, Ireland, shows how anxious people were about Tuesday’s meeting, which ended without a deal to bail out Ireland’s debt-stricken government. 

Associated Press

A newspaper seller’s sign Monday in Dublin, Ireland, shows how anxious people were about Tuesday’s meeting, which ended without a deal to bail out Ireland’s debt-stricken government. 

BRUSSELS — An anxiously awaited meeting of European finance ministers ended Tuesday without an agreement to bail out Ireland's debt-stricken government, though both Irish and European Union officials vowed to stabilize the banks at the center of the crisis and keep it from spreading to other fragile economies connected by the euro.

Concerns that Ireland will be unable to pay the cost of rescuing its banks — which ran into trouble when the country's real estate boom collapsed — have worsened Europe's government debt crisis. Markets have pushed up borrowing costs for other vulnerable nations and threatened to destabilize the common euro currency.

Ireland has taken over three banks and is expected to take over more in a bailout that has already reached $61 billion and probably will push the nation's 2010 deficit to a staggering 32 percent of gross domestic product. (The comparable figure for the United States is 10.6 percent). The government in Dublin insists that it doesn't need a bailout from Europe, but growing doubts about Ireland's ability to pay its bills have sent interest rates soaring on Irish bonds.

Representatives of the European Union, the European Central Bank and the International Monetary Fund will travel to Ireland this week to determine what to do about the banks, Irish Finance Minister Brian Lenihan said.

"We will take whatever decisive measures that are required to stabilize our banking system as part of the stability of the wider eurozone," Lenihan said.

The priority for European leaders is containing contagion — a market panic that jumps from one weak country to the next.

Behind Ireland stands Portugal, which is considered by some to have done less than the Irish to bring debt and deficits back under control. Next comes Spain, with a proportionally smaller debt burden but a dead-in-the-water economy that is so big — 11.7 percent of eurozone output — that it could present a much larger challenge if it needs help.

Stock prices fell worldwide and gold and other commodities plunged in value as investors awaited word from the talks in Brussels. The euro fell 0.7 percent against the dollar to $1.35.

The interest rate on Irish debt rose again Tuesday as hopes faded that the country would seek a bailout like the one that saved Greece from defaulting on its bonds in May. A $1 trillion backstop stands ready from other countries that use the euro.

Governments struggling with debt have slashed spending and raised taxes. But such austerity measures threaten to undermine desperately needed economic growth, in turn making it harder for nations to repay their debts.

European officials' meeting ends without bailout deal for Ireland 11/16/10 [Last modified: Monday, November 7, 2011 1:22pm]

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