£72bn Irish rescue package is agreed

An 85 billion euro (£72.1bn) bail-out for the Irish Government from the International Monetary Fund (IMF) and Europe has been agreed, head of eurozone ministers Jean-Claude Juncker said tonight.

The deal for the rescue package was approved at an emergency meeting of European Union finance ministers in Brussels in time for the markets to reopen tomorrow.

The Irish Government applied for the loan last Sunday when it conceded the bank crisis was too big for the country.

In a statement the Irish Government said the purpose of the external financial support is to return its economy to sustainable growth and to ensure it has a properly functioning healthy banking system.

The Irish contribution to the facility will be 17.5 billion euro (14.7bn), which will come from the National Pension Reserve Fund (NPRF) and other domestic cash resources. "This means that the extent of the external assistance will be reduced to 67.5 billion (£56.7bn)," it added.

The facility will include up to 35 billion euro (£29.4bn) to support the banking system, 10 billion euro (£8.4bn) for the immediate recapitalisation and the remaining 25 billion euro (£21bn) will be provided on a contingency basis. The funds in the facility will be drawn down as necessary, although the amount will depend on the capital requirements of the financial system.

"If drawn down in total today, the combined annual average interest rate would be of the order of 5.8% per annum," it stated.

"The rate will vary according to the timing of the drawdown and market conditions."

Taioseach Brian Cowen said the deal was "necessary for our country and our people".

He added: "The final agreed programme represents the best available deal for Ireland.

"It allows us to move forward with secure funding for our essential public services, for our welfare state, for the most vulnerable members of society that depend on them.

"And it provides Ireland with vital time and space to successfully and conclusively address the unprecedented problems we have been dealing with since this global economic crisis began."

Mr Cowen said the assistance of Ireland's EU partners and the IMF was required because of the high yields on Irish bonds, which have curtailed the state's ability to borrow.

"Without this external support, the state would not be able to raise the funds required to pay for key public services for our citizens and to provide a functioning banking system to support economic activity," he said.

"This support is also needed to safeguard financial stability in the euro area and the EU as a whole."

He revealed the programme of support covers restructuring, downsizing and reorganising the banking sector as well as fiscal policy and structural reform.

It also endorses the Government's controversial plan to make 15 billion euro (£12.6bn) worth of savings over the next four years and the December 7 budget when six billion euro (£5bn) worth of cuts will be revealed.