Editor's Viewpoint: Republic cannot afford to refuse aid
Published 17/11/2010 | 08:00
No matter how often Irish ministers deny that they want their Eurozone partners to bail out the Republic's banks, it does not alter the stark facts that a loan will have to be arranged, probably sooner rather than later.
The macho act of refusing to ask for aid is fooling no one, least of all the financial markets which have seen the cost of lending to Ireland rise significantly in recent weeks. The European Central Bank has propped up Ireland's banks in recent times and if they were to withdraw that support the country would be broke overnight.
It is a crisis, but a crisis of confidence rather than an immediate financial implosion. If Ireland does accept aid from the EU then there would be more confidence in the country's ability to survive the recession. The longer uncertainty continues, the more confidence will ebb away and that could prove disastrous.
The Republic's financial state is of great importance to the UK. The UK is the Republic's biggest trading partner, with a hugely significant flow of goods and services both ways across the Irish Sea as well as the border with Northern Ireland, and it makes evident sense to ensure that the Republic's economy is as strong as possible.
While the UK may be congratulating itself in staying outside the Eurozone, there is every likelihood that it still will be asked to help fund any aid package to the Republic. A suggestion by EU Council President, Herman Van Rompuy, that the EU was in a "survival crisis" because of fears over the Republic's and Portugal's economies may be exaggerating the problem, but it is the sort of talk which could become a self-fulfilling prophesy unless these economic problems are sorted out swiftly.
The Republic can avoid further crisis by availing of what help is on offer and bringing some stability to its economy ahead of austerity measures to be announced next week.