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Euro and shares rise after Irish rescue deal Euro and shares rise after Irish rescue deal
(40 minutes later)
European shares and the euro have both risen slightly in value, as markets gave a muted welcome to the bail-out for the Irish Republic.European shares and the euro have both risen slightly in value, as markets gave a muted welcome to the bail-out for the Irish Republic.
It comes as Dublin is set to begin the formal process of applying for up to 90bn euros (£77bn; $124bn) of European Union-led loans agreed on Sunday.It comes as Dublin is set to begin the formal process of applying for up to 90bn euros (£77bn; $124bn) of European Union-led loans agreed on Sunday.
The UK's FTSE 100 was up 0.5%, while Germany's Dax had added 0.6%, and the euro had strengthened to $1.376.The UK's FTSE 100 was up 0.5%, while Germany's Dax had added 0.6%, and the euro had strengthened to $1.376.
The total level of loans the UK will give is expected to to be about £7bn.The total level of loans the UK will give is expected to to be about £7bn.
This includes Britain's contributions to European Union and International Monetary Fund (IMF) bail-out schemes, and direct bilateral loans.This includes Britain's contributions to European Union and International Monetary Fund (IMF) bail-out schemes, and direct bilateral loans.
Chancellor George Osborne told BBC Radio 4's Today programme that it was in the UK's national interest to help the Irish Republic.Chancellor George Osborne told BBC Radio 4's Today programme that it was in the UK's national interest to help the Irish Republic.
"Our two economies are connected, and our two banking systems are interconnected."Our two economies are connected, and our two banking systems are interconnected.
"Ireland is a friend in need, and we are here to help.""Ireland is a friend in need, and we are here to help."
The bond markets also appeared to welcome the Irish Republic's bail-out news, with yields on Irish bonds falling below 8%, indicating a very small decline in fears it will default on it debt. The bond markets also appeared to welcome the Irish Republic's bail-out news, with yields on Irish bonds falling below 8%, indicating a very small decline in fears it will default on its debt.
Smaller banksSmaller banks
The crisis in the Irish Republic has been brought on by the recession and the almost total collapse of the country's banks, analysts say.The crisis in the Irish Republic has been brought on by the recession and the almost total collapse of the country's banks, analysts say.
Once known as the Celtic Tiger for its strong economic growth - helped by low corporate tax rates - a property bubble burst, leaving the country's banks with huge liabilities and pushing up the cost of borrowing for them and the government.Once known as the Celtic Tiger for its strong economic growth - helped by low corporate tax rates - a property bubble burst, leaving the country's banks with huge liabilities and pushing up the cost of borrowing for them and the government.
The EU and IMF loans will be provided to the Republic over a three-year period.The EU and IMF loans will be provided to the Republic over a three-year period.
"It is necessary to help Ireland, otherwise the whole eurozone would be in danger," said Austrian Finance Minister Josef Proell."It is necessary to help Ireland, otherwise the whole eurozone would be in danger," said Austrian Finance Minister Josef Proell.
Under the bail-out deal, Irish income tax will increase, but the country's low 12.5% corporation tax - controversial for some other countries but "non-negotiable" for the Irish government - will not be touched. Under the bail-out deal, Irish income tax is set to increase, but the country's low 12.5% corporation tax - controversial for some other countries but "non-negotiable" for the Irish government - will not be touched.
Irish Finance Minister Brian Lenihan said the bail-out would also help to reduce the government's budget deficit to a target of 3% of GDP by 2014.Irish Finance Minister Brian Lenihan said the bail-out would also help to reduce the government's budget deficit to a target of 3% of GDP by 2014.
To help achieve this, the Irish government will publish a four-year budget plan later this week, which is due to announce 15bn euro of austerity measures. To help achieve this, the Irish government will publish a four-year budget plan on Wednesday, which is due to announce 15bn euro of austerity measures.
At 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.
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.
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.
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.
The main concern for the Republic's economy is its banks, most of which are now controlled by the government. They have had to borrow at least 83bn euros (£71bn) from the European Central Bank because other banks will not lend to them.
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At 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.
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.
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.
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.
The main concern for the Republic's economy is its banks, most of which are now controlled by the government. They have had to borrow at least 83bn euros (£71bn) from the European Central Bank because other banks will not lend to them.
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Mr Lenihan said EU and IMF officials had seen the outline of the budget plan, and "it is unlikely that they will request changes".Mr Lenihan said EU and IMF officials had seen the outline of the budget plan, and "it is unlikely that they will request changes".
Dublin will also outline in the plan how the country's banking industry will be restructured, with Irish banks being turned into much smaller institutions. Dublin will also outline in the plan how the country's banking industry will be restructured, with Irish banks expected to be turned into much smaller institutions.
Despite the bail-out announcement, and the Irish government's efforts to put in place austerity measures, credit rating agency Moody's has warned that it is "likely" to have to reduce its rating for the country.
However, Moody's added that despite the "multi-notch downgrade" it would still leave the Irish Republic with an investment-grade rating.
Announcing the bail-out on Sunday, Mr Cowen appealed for public solidarity.Announcing the bail-out on Sunday, Mr Cowen appealed for public solidarity.
"To the Irish people I say simply this: We should not underestimate the scale of our economic problems, but we must have faith in our ability as a people to recover and prosper once more," he said."To the Irish people I say simply this: We should not underestimate the scale of our economic problems, but we must have faith in our ability as a people to recover and prosper once more," he said.
"The task of rebuilding our economy falls to our own efforts as a people," he told a news conference following a cabinet meeting on the rescue plan."The task of rebuilding our economy falls to our own efforts as a people," he told a news conference following a cabinet meeting on the rescue plan.
On Thursday last week, the Irish government admitted for the first time that it may need outside help, as a result of the money it had pumped into its banks.On Thursday last week, the Irish government admitted for the first time that it may need outside help, as a result of the money it had pumped into its banks.
Previously Dublin had said it did not need any financial support from the European Union and IMF.Previously Dublin had said it did not need any financial support from the European Union and IMF.
Portugal concernsPortugal concerns
Some EU officials fear the Republic's financial problems might spread to other eurozone countries with large budget deficits, particularly Portugal.Some EU officials fear the Republic's financial problems might spread to other eurozone countries with large budget deficits, particularly Portugal.
BBC business editor Robert Peston said "it would be a very foolish individual" who predicted that the Irish bail-out was "the solution to all of the eurozone's problems".BBC business editor Robert Peston said "it would be a very foolish individual" who predicted that the Irish bail-out was "the solution to all of the eurozone's problems".
He added: "The reality is that Portugal also has excessive debt, although not to the same scale as Ireland.He added: "The reality is that Portugal also has excessive debt, although not to the same scale as Ireland.
"But Portugal also has real structural problems that they will struggle to get through on their own.""But Portugal also has real structural problems that they will struggle to get through on their own."
Our business editor added that the EU still had sufficient funds to bail-out Portugal, but that it would then leave other nations such as Spain and Italy to "muddle through on their own".Our business editor added that the EU still had sufficient funds to bail-out Portugal, but that it would then leave other nations such as Spain and Italy to "muddle through on their own".
Portugal's Finance Minister Fernando Teixeira dos Santos said the aid package for the Irish Republic "reduces uncertainty and reinforces market confidence" in the wider eurozone economy.Portugal's Finance Minister Fernando Teixeira dos Santos said the aid package for the Irish Republic "reduces uncertainty and reinforces market confidence" in the wider eurozone economy.
The EU and the IMF launched a 110bn euro rescue programme for Greece in May after the government was faced with the prospect of bankruptcy.The EU and the IMF launched a 110bn euro rescue programme for Greece in May after the government was faced with the prospect of bankruptcy.
Big government spending cuts sent large numbers of Greeks onto the streets in protest.Big government spending cuts sent large numbers of Greeks onto the streets in protest.
What do you think of the bail-out? Will it be enough to prevent further contagion across the eurozone? What kind of conditions should be attached, do you think? Send us your comments using the form below.What do you think of the bail-out? Will it be enough to prevent further contagion across the eurozone? What kind of conditions should be attached, do you think? Send us your comments using the form below.