Eurozone ministers are set to meet in Brussels as the debt crisis once again threatens the 16-member bloc's economic stability.
Eurozone ministers are set to meet in Brussels later as the debt crisis again threatens the bloc's economic stability.
The talks come as the spotlight once again falls on the weaker member countries, and whether they can manage their debt without help from European Union (EU) assistance funds.
The spotlight has fallen on weaker member countries, and whether they can manage their debt without help from European Union (EU) assistance funds.
The Irish Republic on Monday insisted it did not need EU help.
The Irish Republic has insisted it does not need EU help.
But there is intense speculation it may be forced to use EU bail-out money.
But there is intense speculation that both it and Portugal may be forced to use EU bail-out money.
Dublin said it was in contact with "international colleagues" but the Prime Minister, Brian Cowen, dismissed talk of a bail-out by the EU or IMF.
Portugal's finance minister has said that investors believed that his country would be forced to seek emergency help, because of the worries spreading in the markets.
"One of the great pejorative phrases that continue to be used is this thing of bail-out which suggests that the country is in some way seeking not to meet its obligations to meet its own debts - that is not the case," he said.
Fernando Teixeira dos Santos urged Dublin to do the right thing for the euro and accept a bail-out.
He added that his government had firm plans for sorting out the country's problems.
Solidarity sought
"In the coming weeks will be putting forward the plans that show how we put our budget back into order as a member of the Euro area," he said.
The BBC's business editor Robert Peston said that much hinged on the stance of the European Central Bank (ECB) - which has propped up the Irish Republic's banking system with loans it could not get on the money markets.
the beginning of 1999, Ireland adopted the euro as its currency, which meant its interest rates were set by the European Central Bank and suddenly borrowing money became much cheaper.
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Cheap
and easy lending and rising immigration fuelled a construction and house price boom. The government began to rely more on property-related taxes while the banks borrowed from abroad to fund the housing boom.
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All
this left Ireland ill-equipped to deal with the credit crunch. The construction sector was hit hard, house prices collapsed, the banks had a desperate funding crisis and the government was receiving much too little tax revenue.
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The
economy has shrunk and the government has bailed out the banks. A series of cost-cutting budgets have cut spending, benefits and public sector wages and raised taxes. But there are still doubts about future government funding.
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Jean-Claude Juncker, the head of the Eurogroup of finance ministers, said the eurozone was ready to act "as soon as possible" if Ireland sought financial assistance.
"Without the financial support of the ECB, Ireland would be bust right now," he said.
But he stressed that "Ireland has not put forward their request".
"But if there is the faintest sign that the ECB wants to withdraw the succour it has provided to weak eurozone banks, Ireland will no longer have a choice, it will have to go cap in hand either to its EU partners or to the IMF."
"As long as they don't, we are not supposed to deal with a theoretical request," he said.
The Irish Republic's Europe Minister, Dick Roche, admitted that there were major liquidity problems at the country's banks.
A spokesman for Economic and Monetary Affairs Commissioner Olli Rehn said that pressure on Dublin to take a bail-out was not coming from the European Commissioner, but from "another player".
However, he told the BBC that his government had made major spending cuts which would be continued in its upcoming budget, and added that he hoped there would be "solidarity" from European colleagues at the Brussels meeting.
"I would hope after the meeting there would be more logic introduced into this," he told the BBC.
Last week, market anxiety spread to other heavily indebted eurozone nations, including Portugal and Spain, driving up their borrowing costs.
"There is no reason why we should trigger an IMF or an EU-type bail-out. There is a problem with liquidity in banks, there is no doubt about that. But I don't think that the appropriate response to that would be for the European finance ministers to panic."
"The risk is high because we are not facing only a national or country problem," he told the FT. "It is the problems of Greece, Portugal and Ireland. This is not a problem of only this country."
The government has consistently stated its determination to restore stability to the public finances and stressed that it was "fully funded" until late 2011.
He stressed subsequently, however, that Portugal had no immediate plans to ask for assistance.
The banks have struggled since 2008, when the Irish Republic suffered a dramatic collapse of its property market.
The yield on Irish bonds - essentially IOUs sold by the government to fund state spending - traded lower on Monday, suggesting a slight easing of concerns.
Although Tuesday's talks are routine, formal meeting of Eurozone ministers, the BBC's Europe editor Gavin Hewitt said that high-level talks had already begun, involving European Commission President Jose Manuel Barroso and his economy commissioner Olli Rehn.
Brussels fears that any delay risks repeating the Greek crisis that earlier this year threatened the entire eurozone, he added.
Some reports suggest that the Irish Republic could seek help for its banking sector alone, rather than asking for help at a government level.
This, say observers, would save them the embarrassment of being rescued by the EU and avoid greater involvement by Brussels in economic decisions.
The Irish government has all but nationalised the country's banking system, which had lent recklessly to property developers at a cost of 45bn euros.
'Stand alone'
The government has consistently stated its determination to restore stability to the public finances and stressed that it was "fully funded" until 2011.
Meanwhile concerns persist about the state of the Greek economy, which received an EU bail-out worth up to 110bn euros.
European and IMF officials will be in the country this week to decide whether to release the final tranche of the money.
The scale of the problems still facing Greece were further underlined by the latest official European figures which showed that its budget deficit in 2009 was markedly higher than previously stated.
Cuts impact
Since 2008, the Irish Republic has suffered a dramatic collapse of its property market.
House values have fallen between 50% and 60% and bad debts - mainly in the form of loans to developers - have built up in the country's main banks, bringing them to the verge of collapse.
House values have fallen between 50% and 60% and bad debts - mainly in the form of loans to developers - have built up in the country's main banks, bringing them to the verge of collapse.
The country has promised the EU it will bring its underlying deficit down from 12% of economic output to 3% by 2014.
Reports suggest the Republic will try to reassure markets by bringing forward details of its four-year financial plan to next week.
Its current deficit is an unprecedented 32% of gross domestic product, if the cost of bad debts in the Irish banking system is included.
The proposals will be severe. It has said it will impose unprecedented spending cuts or tax rises totalling 6bn euros to try to bring its underlying budget deficit down from about 12% to between 9.5 and 9.75% next year.
The Irish government, which has a flimsy majority in parliament, is expected to publish another draconian budget on 7 December.
While intended to boost confidence in the country's finances, investors fear the budget cuts could plunge the Republic back into recession, leading to further losses to the government via falling tax revenues and higher benefit payments.
This will impose spending cuts or tax rises totalling 6bn euros to bring the deficit down to between 9.5-9.75% next year.
Investors fear the budget cuts are likely to worsen the country's already deep recession, leading to further losses to the government via falling tax revenues and higher benefit payments.
