Ireland denies need for bailout as fears grow over public finances

Prime Minister Brian Cowen used a statement in the Dail to insist the debts were "fully funded" until mid-2011 and that domestic measures to stabilise public finances were working.

At the same time his finance minister Brian Lenihan arrived for talks with his 15 eurozone counterparts in Brussels to assess the impact on the single currency, now under severe pressure in the markets.

He was expected to fend off mounting pressure on Ireland to accept the need for a massive bail-out, either from the European Union or the International Monetary Fund or a mixture of the two.

Germany was leading efforts to convince Mr Lenihan that market stability and the long-term security of the euro could only be guaranteed by swift, decisive action to prop up Ireland.

Mr Cowen told Irish MPs: "We are living in a very fragile time and we need to be careful about what we say so that we don't add to the turbulence. Those that are now commenting on Ireland's financial situation should also remember that the Exchequer is fully funded into the first half of 2011, so the impending sense of crisis that some wish to suggest the Irish State faces is not a fair reflection of the facts."

But on Ireland's massive deficit – at 32 per cent of Gross Domestic Product, the highest in Europe and way above the maximum three per cent allowed under single currency rules – Mr Cowen said: "While substantial progress has been made in tackling and stabilising the deficit, this Government is acutely aware that further measures will be required to restore sustainability to the public finances. That is vital to underpin future economic growth."