16 November 2010

Concern in Europe as Ireland resists EU ‘bail-out’

Speculation over the economic stability of Europe was fuelled today by the reported refusal of Ireland to accept financial assistance from the European Union.

With their economy in increasingly desperate shape, it was thought that Ireland would seek help from the European Financial Stability Fund which was set up earlier this year to support Greece through similar financial crisis.

It was rumored that Ireland would look to secure funds of up to 80 billion euros from the fund, however the Republic deny that any discussions are taking place.

The plummeting of house values and mounting development-related debts accumulating in the country’s largest banks have left Ireland with a total deficit of 32% of its gross domestic product.

The Irish government is proposing tax rises and spending cuts in its December budget with the aim of generating 6 billion euros by next year. However, it is feared that such cuts will only serve to deepen Ireland’s recession and end up costing the government in benefit payments and falling tax revenues.

It is thought that Ireland’s reluctance to accept the EU ‘bail out’ is due to fears of relinquishing economic control and jeopardising their sovereignty.

This decision is proving unpopular in the rest of Europe which is keen to avoid financial problems in one country escalating into economic crisis on a wider scale. It is also having a knock on effect on the performance of the euro which is plummeting against the increasingly strong US dollar.

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