£72bn bailout for Ireland after Ministers back rescue package

Head of eurozone ministers Jean-Claude Juncker made the announcement of the 85bn euro (72.1bn) rescue package following an emergency meeting of European Union finance ministers in Brussels in time for the markets to reopen today.

The Irish government applied for the loan last Sunday when it conceded the bank crisis was too big for the country. It will now have to be signed off by the 16 eurozone finance Ministers before it can be passed at a second meeting with the finance ministers of the 27 European Union countries.

Irish Taoiseach Brian Cowen tonight welcomed bailout, describing it as "necessary to allow us to fund our budgets over the coming years".

In a statement the Irish Government said the purpose of the external financial support is to return its economy to sustainable growth and to ensure it has a properly functioning healthy banking system.

The deal was struck after Ireland's Finance Minister Brian Lenihan travelled to Brussels to finalise the rescue package at an emergency meeting of his EU counterparts, including Chancellor George Osborne.

It is understood discussions centred on how much interest Ireland will pay on the loan from Europe and the IMF and to what extent private bondholders will be covered.

Of the 85 billion euros, Ireland itself has agreed to contribute 17.5 billion by raiding pension funds to play its part in its own bail-out. That share will go to prop up the ailing banks.

Of the rest, the International Monetary Fund is acting as guarantor for 22.5 billion euros while the remaining 45 billion euros is split equally between the European Financial Stability Mechanism – something to which the UK contributes 13.6 per cent – and the European Financial Stability Facility, which only involves the eurozone countries.

Combined with a bilateral loan from London direct to Dublin of nearly 3.9 billion euros, the UK's financial exposure from the deal totals nearly seven billion euros.

As he left the talks last night Chancellor George Osborne confirmed the UK figure, but pointed out that, while the bilateral loan was money going to Dublin, the remainder was part of a bailout package which acts merely as collateral for Ireland and would only be triggered if Ireland defaulted.

Of the bilateral cash, Mr Osborne commented: "This is money we would fully expect to get back from Ireland.

"It is in Britain's national interest (to take part in the bailout). It will help Ireland get back on a stable path.

"This is an impressive package that will help Ireland and it is in everyone's interests that Ireland can grow and have stability. Ireland is a major trading partner (for the UK) and many jobs depend on exports to Ireland."

The Chancellor said details of interest rates Ireland would pay on its loans would be worked out in the coming weeks, and he hoped the deal would give "real reassurance" to markets "that Europe is determined to sort out its problems".

The Ministers also agreed tonight that a longer-term permanent financial rescue mechanism – replacing a temporary one triggered by the Greek crisis earlier this year – would be in reduced bailout aid to private sector creditors. The idea is to establish the principle that ordinary taxpayers will not foot the total bill in the case of any future bailouts. Private sector liability would be decided on a "case by case" basis said a statement.

THOUSANDS JOIN DUBLIN PROTESTS

The rescue deal was struck the day after more than 50,000 protesters marched through the streets of Dublin against the country's drastic austerity measures and impending tax rises.

Earlier public service workers, students and left-wing political groups marched through Dublin under the banner of the Irish Congress of Trade Unions (ICTU) to demand a better and fairer way.

Thousands of people packed the capital's main thoroughfare, O'Connell Street, for a mass rally outside the historic GPO building – where the Proclamation of Independence was read in 1916.

About 400 activists later picketed outside the Dail where a small group threw bottles, paint and bangers during a tense stand-off with gardai.

Masked men also set fire to a poster of Taoiseach Brian Cowen.

A Garda spokesman said the protest passed peacefully, with just one man arrested and released.

The Dublin march comes after the Irish government suffered a blow with a byelection defeat yesterday, leaving the coalition government with a majority of just two.