Osborne considers 'all options' on Irish aid

The Treasury is considering all options for financial aid to Ireland, Chancellor George Osborne said today.

But he refused to speculate on whether the UK was on the brink of announcing bilateral loans, or making a contribution to an EU bail-out package.

He was speaking after talks in Brussels with his EU counterparts, at which Ireland's finance minister Brian Lenihan repeated Dublin's rejection - so far - of a bail--out offer from the member states.

"We (the UK) are going to do what we regard as being in the British national interest: Ireland is our closest neighbour, so it is in our national interest that the Irish economy is successful and that the Irish banking system is stable," Mr Osborne said.

"Britain stands ready to support Ireland on the steps it needs to take to bring about that stability."

He added: "I won't speculate on what kind of assistance we might provide. There are options, and we are looking at all of those.

"But remember, the Irish have not requested assistance and these are precautionary discussions. We (the EU) are having perfectly sensible, precautionary discussions about what happens if Ireland sought assistance."

But most EU Governments now believe Ireland will take advantage of a bail-out - probably not before the Government has unveiled a four-year economic recovery programme, expected to be published next week.

The fact that Ireland agreed last night to open its books to a team of EU, European Central Bank and International Monetary Fund (IMF) experts reinforced the view that a multi-billion pound bail-out is on the cards, sooner rather than later.

IMF staff were expected to arrive in Dublin tonight to start work on what EU economics and monetary affairs Commissioner Olli Rehn described as "an intensification of preparations of a potential programme in case it is requested and in case it is necessary".

This afternoon Mr Osborne had talks with Mr Lenihan, saying afterwards: "I have expressed my support for him and the tough job he has got on his hands at the moment, which I think he is carrying out very well".

Last night, after a separate meeting of the 16 EU finance ministers from the single currency countries, a statement said: "The Eurogroup welcomes the significant efforts of Ireland to deal with the challenges it faces in the budgetary, competitiveness and financial sector areas."

It also said that, in the face of continuing market concern, "further reforms and stabilisation measures may be appropriate".

The hope is that such declarations of support will begin the work of calming jittery markets and prevent euro "contagion" spreading to affect weak euro economies such as those of Portugal, Spain and Greece, which was the focus of the first euro meltdown earlier this year.

But most EU Governments are still urging Dublin to opt for a bail-out to reinforce the euro's battered credibility.

Mr Osborne pointed out that, apart from its four-year recovery plan next week, Dublin will be unveiling a new budget next month in a bid to deal with its massive deficit.

Only then, say EU officials, is Dublin likely to feel comfortable taking bail-out loans from Brussels - if it decides to cave in to pressure and do so at all.