Confusion was swirling around the Republic of Ireland's economic future last night amid continuing conflicting reports as to whether an international bailout may be on the cards.
The Dublin government yesterday repeatedly denied reports that it is seeking a rescue package involving the EU and the IMF, and those two bodies likewise denied any aid operation is imminent. The denials did something to reassure bond markets – which have recently grown highly jittery about Irish prospects; euro-zone countries have shown increasing anxiety about potential knock-on effects of Dublin's crisis elsewhere in Europe.
The EU and the IMF insist that no formal Irish request for assistance from their multi-billion-euro resources has been lodged. But the widespread assumption is that preparatory work is under way, to prepare for the possibility that such an application may be made. This is seen as little more than common sense, given that Ireland faces months of uncertainty both in the economic and the political sphere.
The government's wafer-thin majority depends on the support of independent legislators, many of whom are unabashedly putting constituency concerns before national interests. The administration therefore cannot be confident that on 7 December it will successfully pass a budget which – it has repeatedly warned – will be the most severe in the country's history.
The tremors of uncertainty have increased in recent days, as media outlets including the BBC have reported that talks on an EU bailout are under way. Irish government denials, including one from the Prime Minister Brian Cowen himself, have focused on stating that no formal requests have been made. Mr Cowen said: "Ireland has made no application whatever for funding. We have funding up to mid-year. We don't have to borrow any money, in respect of the sovereign issue, that affects the running of the country." His Enterprise Minister, Batt O'Keeffe, added yesterday: "This issue has not been raised at all in government ... As far as the government is concerned there is no crisis."
Sceptical observers speculate that the words used by ministers do not appear to rule out entirely contacts between Irish officials and the EU or IMF.
Mr O'Keeffe also stressed Ireland's control over its own finances, declaring: "It's a very hard-won sovereignty for this country, and this government is not going to give over that sovereignty to anyone." His words reflect the fact that public opinion in the Irish Republic – having been independent for less than a century – remains particularly sensitive to issues of sovereignty.
Any handing over of economic policy-making to outsiders, no matter how well-disposed, would bring with it overtones of national humiliation. It would also sound the death knell for the government led by Fianna Fail, which is the major party and the one that is loudest in proclaiming its attachment to national sovereignty.
The party is in any event on the floor, notching up historic lows in opinion polls as voters blame it for a recession that has hit Ireland particularly hard. It is regarded as having mishandled the economy, partly through inadequate banking regulation, as a collapse in property prices and the construction industry fuels popular anger.