European and IMF officials started thrashing out the details of a three-year bailout package for Ireland Monday while the government puts the finishing touches to a 15 billion euro ($20.5 billion) austerity plan.
The EU and the IMF agreed on Sunday to help bail out Ireland with loans — expected to total 80 billion euros to 90 billion euros ($109.33 billion to $122.99 billion) — to tackle its banking and budget crisis.
Officials hope the move will stabilize financial markets that have been selling Irish debt and prevent them losing confidence in other euro zone members, notably Portugal and Spain.
Britain plans to commit around 7 billion pounds ($11.2 billion) to help neighbor Ireland resolve its financial crisis, Finance Minister George Osborne also said on Monday.
Osborne said Britain planned bilateral aid to Ireland as well as honoring its international commitments, but said Britain did not want to be part of a permanent bail-out mechanism for euro zone members.
"What we have committed to do is to obviously be partners as shareholders in the IMF in an international rescue of the Irish economy," Osborne told BBC Radio 4. "But we have also made a commitment to consider a bilateral loan that reflects the fact we are not part of the euro ... but Ireland is our very closest economic neighbor."
Osborne was asked about reports that Britain was going to contribute around seven billion pounds to Ireland, a country with which it has more trade than with the emerging powers of Brazil, Russia, India and China combined.
"It's around that (figure), it's in the order of billions not tens of billions but the details of the entire package, not just the UK contribution, but the euro zone and IMF contribution, that is all being worked out as we speak and we should by the end of the month have the details on that."
Ireland's government, facing public anger over its handling of the crisis, announced plans last month for a package of cuts and tax increases aimed at bringing down a record budget deficit. But its borrowing costs continued to soar, making a bailout almost inevitable.
A four-year fiscal austerity package is expected to contain plans for a new property tax, as well as cuts to benefits and services. Tax breaks for higher earners may also go.
Irish Tourism Minister Mary Hanafin told RTE television the four-year plan had been finalized but had to be cleared by Europe and the IMF and would be published on Wednesday. A plan to restructure Ireland's banks is being devised as a central plank of the broader international aid package.
Finance Minister Brian Lenihan told a news conference on Sunday that Irish banks would become significantly smaller than they had been and that they may look at selling non-core assets.
The size of the rescue by the EU and the International Monetary Fund has yet to be negotiated but is likely to be smaller than Greece's 110 billion euro ($150 billion) bailout last May.
EU Economic and Monetary Affairs Commissioner Olli Rehn said experts from the European Commission, European Central Bank and IMF would prepare a three-year package of loans by the end of the month.
EU policymakers have feared that Ireland's problems might spread to other euro zone members with large budget deficits such as Spain and Portugal, threatening a systemic crisis.
In Berlin, German Finance Minister Wolfgang Schaeuble played down this risk. "If we now find the right answer to the Irish problem, then the chances are great that there will be no contagion effects," he told ZDF television.
Some economists were less optimistic.
"I think it means Portugal is next (to request help). I don't know if it will happen before the end of the year or after, but it's almost inevitable now," said Filipe Garcia at Informacao de Mercados Financeiros in Porto.
Unions have warned further austerity measures could spark unrest in Ireland.
Calls are mounting for the government to stand down over its handling of the crisis and the main opposition party said on Sunday it would consider putting forward a vote of no-confidence in the government, possibly before a Dec. 7 budget.
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