The European Union and the International Monetary Fund (IMF) on Sunday night unveiled a 85 billion euro ($113 billion) bailout package for heavily indebted Ireland, six months after Greece was rescued from bankruptcy.
The three-year package, designed to prop up the country's battered banking sector and to help service its sovereign debt, was sealed by the finance ministers of the 27-EU nations at an emergency meeting in Brussels.
Ireland's Prime Minister Brian Cowen, who until a week ago opposed an EU bailout, welcomed Sunday's deal with the EU and the IMF and said the loans were necessary to fund the government's budget in the coming years.
"These loans will provide money which we already plan to borrow in the financial markets," he said, "Funding will now be available to Ireland at a cheaper interest rate than if we had borrowed in the financial markets."
A total of 50 billion euros has been earmarked to support the state budget while the remainder will be used to stabilise the banking sector, Cowen said.
Ireland is the first country to receive funds from the 750 billion-euro (nearly $1 trillion) financial rescue fund for the Eurozone, which was set up by the EU and the IMF in the aftermath of the Greek debt crisis in May, to support other Eurozone nations facing a liquidity crisis.
The country needed a bailout as in the aftermath of the global banking crisis, the government, this year, raked up a staggering budget deficit of 32 per cent of the GDP, ten times more than the level permitted to the EU countries.
Greece was bailed out with a separate 110 billion-euro financial assistance from the EU and the IMF.
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The rescue plan for the "Celtic Tiger" is also intended to stabilise the 16-nation euro area by calming down the financial markets, which have became jittery for past weeks over speculation that Portugal may be next in line for a bailout.
The Irish government in return has pledged to save 15 billion euros through tough spending cuts and tax increases to get its deficit below the 3 per cent limit, set by the EU Growth and stability Pact by 2014.
Ireland will pay an interest rate of 5.8 per cent, slightly higher than 5.2 per cent paid by Greece for its bailout. However, the country's low corporate tax, which has been a bone of contention with its EU partners, will remain unchanged at 12.5 per cent.
Several member-nations, especially France and Germany, have been arguing that Ireland's corporate tax give the country an unfair advantage in attracting foreign investments.