Osborne at Portugal bail-out talks

The three-year 78 billion euro (£67.75 billion) aid package is similar to one already granted to Ireland on the basis of financial guarantees from the EU member states and the IMF.

But the latest financial lifeboat for a debt-laden eurozone country has been overshadowed by the arrest in New York of IMF chief Dominique Strauss-Kahn on sex assault allegations.

Mr Strauss-Kahn had been due in Brussels to oversee the Portuguese deal and to discuss with the EU the growing economic crisis in Greece, which may mean revising the rescue package already granted to Athens.

The IMF insisted his absence changed nothing and that the organisation was “fully functioning and operational”.

Meanwhile Mr Osborne has ruled out any UK involvement in a second Greek bail-out, as Britain was not involved in the first, agreed with some member states a year ago when the economic crisis first began to bite.

But the UK is part of the subsequent 60 billion euro European Financial Stability Mechanism (EFSM) used to help underwrite a bail-out for Ireland, and being used as part of the Lisbon deal.

And until the EFSM is replaced in 2013 by a permanent bail-out fund only committing eurozone countries, the UK remains exposed.

“I’m tied into a (bail-out funding) mechanism I inherited from my predecessor; it is being used in Portugal’s case.....I can’t get my country out of it until 2013,” Mr Osborne said in a television interview last week.

“When it comes to Greece, I don’t think Britain should be involved in future discussions because we were not part of the original package, which was a eurozone package, and we’re not in the eurozone.”

Last night the UK Independence Party called on Mr Osborne to make clear that the UK would not take part in any more bail-outs, even those arising before 2013.

UKIP leader Nigel Farage said: “These bail-outs are not working and British taxpayers should not have to pick up the tab.

“Osborne can no longer blame the last Government for our involvement: as Denmark has just shown by reinstating border controls, Britain can act in our own interests against the wishes of the Euro elite.”

He added: “There is no justification, moral, economic or political, for Britain to continue to bail out those debt-laden nations of Europe to the tune of billions today and untold amounts in the future, while essential services are being closed at home.

“Osborne must do the right thing by the British people: unless he refuses, point blank, to increase Britain’s contribution to these bail-outs, then he makes it clear that he would prefer to see British libraries, care homes and youth centres close in order that we can keep bailing out country after country.”

The ministers are also due to discuss Irish progress on its national austerity programme, which is a key condition for every bail-out deal.

Ireland wants cheaper loan interest rates, and is watching closely the terms of the Portuguese deal and any suggestions for a revised Greek deal, although no formal decisions will be taken.

Ministers are bound to assess the latest unforeseen twist in the European economic crisis - the potential impact of Mr Strauss-Kahn’s personal problems on the continuing bid to stop the economic rot and stabilise the eurozone economies.