European Union and International Monetary Fund experts will start scanning the books of Irelandâ€™sÂ debt-laden banks tomorrow in Dublin in a prelude to a possible aid package to stem Europeâ€™s widening fiscal crisis.
Finance chiefs from the 16-country euro area said the joint assessment will determine whether Ireland can patch up the banking system on its own or needs to fall back on the EU-IMF 750 billion-euro ($1 trillion) rescue fund.
â€œIf banking problems are too big for this small country to manage, Europe has made it clear theyâ€™ll help,â€ Irish Finance MinisterÂ Brian Lenihan told state broadcaster RTE today as meetings of European finance ministers wrapped up in Brussels.
As Europe struggled to present a united front to maintain its fiscal credibility, Britain said it would back support for Ireland, abandoning a hands-off policy toward theÂ euro region to prevent Irish bank woes from spilling over into the U.K. market.
In a blow to Ireland, LCH Clearnet Ltd. raised the margin requirement for Irish bond trading to 30 percent of net positions, making it more expensive to buy Irish securities.
Irish bonds slipped for a second day, pushing the 10-year yield up 5 basis points to 8.51 percent. TheÂ extra yieldover German bunds rose 6 basis points to 567 basis points. The spread, a measure of the risk of investing in Ireland, peaked at 646 basis points on Nov. 11.
The Dublin consultations with the ECB,Â European Commission and IMF will â€œsee if the state is able to cover the needs of the banking sector,â€ Belgian Finance MinisterÂ Didier Reynders told reporters today. â€œIf thatâ€™s not the case, there will probably have to be a European intervention.â€
Such a package could come together quickly, the officials said. â€œIs it six months or a few days away? Iâ€™d say itâ€™s closer to days,â€ French Finance MinisterÂ Christine Lagarde said.
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