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A vendor sold newspapers in Dublin that featured Europe’s troubled finances, as Irish officials denied they were seeking a lifeline from the EU bailout fund. Above right, a protester threw a garbage can in Athens, which is grappling with a big deficit. (Peter Morrison/ Associated Press) |
Tensions over debt flare across Europe
Ireland denies it’s seeking a bailout
DUBLIN — Europe’s debt crisis spread widening ripples yesterday, with Irish officials denying that their talks with other eurozone governments were aimed at getting a bailout, while Greece’s prime minister accused Germany of making things worse with talk of forcing creditors to take losses.
The flare-up in tension adds to pressure on European Union finance ministers, who will be in Brussels today for their monthly meeting.
After spending their recent gatherings focusing on crisis prevention, a weeklong sell-off of Irish and Portuguese bonds has thrown them back into crisis management.
The Irish Department of Finance said yesterday that it was pursuing “contacts at official level’’ with other eurozone governments and the EU, but aides to Finance Minister Brian Lenihan emphasized Ireland has no need for a lifeline from the European Union’s bailout fund. Ireland said it has enough cash to last through mid-2011.
Prime Minister George Papandreou of Greece, meanwhile, said German pressure to create a mechanism that would let governments default on their debts was scaring off desperately needed investors.
“Whether understood or misunderstood [the German proposal] created a spiral of higher interest rates for the countries that seemed to be in a vulnerable position — such as Ireland and Portugal,’’ Papandreou said in a speech in Paris. “But this could break backs. This could force people into bankruptcy.’’
Papandreou’s comments came as the EU’s statistics agency said Greece’s 2009 deficit had reached 15.4 percent of gross domestic product, up significantly from a previously estimated 13.6 percent.
While the upward revision had been well telegraphed to the markets, it underlined the difficult task Athens faces in getting its deficits below 3 percent by 2014, as specified in its bailout agreement in May.
Analysts said investors need the finance ministers in Brussels to offer a clear path forward for Ireland to reduce its deficit and bear the costs of its enormous bank bailout. Otherwise, markets would continue to dump the bonds of EU’s peripheral nations.
Signaling concerns that Ireland’s problems could drag down other highly indebted nations, Finance Minister Fernando Teixeira dos Santos of Portugal also saw himself forced to deny that his government had sought financial aid. “Portugal has made no official or informal contacts with a view to seeking European aid,’’ he said.
But he added that “if Ireland’s situation deteriorates,’’ the market pressure on Portugal would increase.
Ireland is struggling to slash a budget shortfall that will probably balloon this year to a staggering 32 percent of GDP — a record for postwar Europe.
© Copyright 2010 Globe Newspaper Company.
