Ireland Discloses Bailout Deal Details

12/01/2010 04:15 pm ET | Updated May 25, 2011

DUBLIN — Ireland must consult the IMF and European authorities over any major change to its economic policy, according to documents disclosed Wednesday outlining details of the country's international bailout.

Finance minister Brian Lenihan said Ireland had also been set quarterly targets for its recovery under the deal for up to euro67.5 billion ($89 billion) in international loans.

The documents show the country had promised to take "any corrective actions" necessary to fix its ravaged economy in order to win the deal.

"We have been through a traumatic two years. Of course we would have preferred to avoid to resort to external assistance, but we can emerge from it a stronger and fitter economy," Lenihan told Ireland's parliament.

After making the documents public, Lenihan said the bailout "requires the government to consult with the European Commission, the European Central Bank and the IMF about the adoption of policies that are not consistent with this memorandum."

The documents show that every week government departments will supply regular data on the state of Ireland's finances to authorities offering the country loans.

Under the deal, Ireland has pledged to sell off its stakes in the country's crippled banks "within the shortest timeframe possible."

Prior to the bailout, Ireland had already committed at least euro45 billion to bailing out five banks. The deal provides an immediate euro10 billion to inject into the cash-strapped lenders.

"The reason we had to seek external assistance is because the problems in our banking system simply became too big for this state to handle on its own," Lenihan said.

However, he told lawmakers they would not have a chance to vote to approve Ireland's acceptance of the bailout. "These supporting documents do not represent international agreements and do not require the approval of the Dail," he said, referring to the country's parliament.

Critics have charged prime minister Brian Cowen with meekly accepting a deal which is too costly – Ireland will pay an average of 5.8 percent on its loans – and which they say prevents future governments from altering key elements.

Ireland will hold elections early next year, when Cowen's Fianna Fail party is expected to be ousted.

Lenihan said the government had no option but to accept the terms. "Without this program, our ability to fund the payments to social welfare recipients, the salaries of our nurses, our doctors, our teachers, our (police) ... would have been extraordinarily limited and highly uncertain," he said.

Under the terms of the bailout, Ireland must use euro17.5 billion of its own cash and pension reserves to shore up its public finances.

Opponents say that, in effect, hard-pressed taxpayers will be forced to carry the costs of the government's attempted bailout of its imploded banking sector.

Lenihan also confirmed he would soon announce legislation setting out the burden to be shared by junior debt holders in Irish Nationwide and Anglo Irish Bank.

Cowen said Sunday that European authorities had rejected the idea of senior bondholders taking a hit under the bailout.

Earlier, he defended his plan to cut the country's minimum wage by one euro (US$1.30) from the present rate of euro8.65 (US$11.30) per hour, saving it would help save jobs.

Last week, he outlined a program of deep cuts and tax hikes totaling at least euro15 billion ($20.5 billion), intended to help restore Ireland's deficits to the euro-zone limit of 3 percent of GDP from its current postwar European record of 32 percent.

On Tuesday, national football team manager Giovanni Trapattoni – an Italian – agreed to cut his own euro1.8 million ($2.4 million) salary to help out the country's struggling football authority.

Official data – also released Wednesday – showed Ireland's unemployment rate fell slightly to 13.5 percent over the last month – although new job losses are expected as the austerity measures bite. The Central Statistics Office said the number of people claiming unemployment benefits – which also includes payments to low income workers – was 425,002, also slightly down on October.

However, the number of benefit claimants had risen 2.8 percent over the last 12 months.

Opposition legislator Richard Bruton of the Fine Gael party said the fall in benefit claimants was simply evidence more people were leaving Ireland to find work

Investors, however, showed some support for Cowen's plans as yields on Ireland's 10-year bonds eased to 8.959 percent Wednesday from 9.219 percent on Tuesday.