The EU will find out today whether Ireland’s 85 billion euro bailout will bolster the financial markets and be enough to stop financial contagion spreading to Portugal and Spain.
Yesterday ministers also agreed in principle to a Franco-German proposal to set up a permanent mechanism to deal with further crises from 2013.
In it, private bond holders could share the burden of any future sovereign debt restructuring of a eurozone country.
But Eurogroup President, Jean-Claude Juncker, promised that “after 2013, the principle is not that the private sector will be involved but that decisions will be made on a case by case basis.”
Ireland says 35 billion of its aid package will be used to help restructure its shattered banks. The rest will be used to cover the giant hole in the country’s public finances.
Our correspondent in Brussels reports that “the finance ministers of the eurozone are now trying to stop the domino effect on other countries that are currently in trouble.”
“One of the solutions,” says Sergio Cantone, “could be watering down the idea of forcing banks to share the burden in further crises. This idea is supposed to calm down the markets. But we have to wait to find out how they will react.”