Eurozone finance ministers agreed on Tuesday to lay the groundwork for a bailout of Ireland with the IMF, but said Dublin must decide itself whether to request the aid.
The ministers said they had agreed the European Commission, European Central Bank and International Monetary Fund would this week start a mission to Ireland, whose debt crisis could threaten other eurozone states and the euro area's stability.
Eurogroup chairman Jean-Claude Juncker, who chaired Tuesday's talks, said the 16-nation currency bloc was ready to act if Ireland makes a request.
"It is up to the Irish government to make up its mind" on whether to use the 440 billion euro European Financial Stability Facility (EFSF) set up in May at the height of the Greek debt crisis, Juncker said.
"The discussions that will take place between Ireland and the Commission and the ECB and the IMF will enable us to have at our disposal all the elements and instruments we need were Ireland to make a request for assistance to the EU, the IMF and the Eurogroup," he told a news conference after the talks.
Ireland resisting pressure
Before the ministers met in Brussels, Irish Prime Minister Brian Cowen resisted pressure to request a state bailout but indicated help may be needed for the banking sector, which is a big factor in the country's huge budget deficit.
In Dublin, Cowen said the government was fully funded until mid-2011, and insisted that only the banks may need help.
"The cost of money is simply too high," Cowen said in parliament. "What we are doing is discussing with our European partners as to what stabilisation [measures are] necessary."
Irish banks have grown increasingly reliant on funding from the European Central Bank, as other commercial banks have been reluctant to lend to them following the financial crisis in fellow eurozone member Greece.
Aid could go beyond banks
European Economic Affairs Commissioner Olli Rehn said the EU executive, the ECB and the International Monetary Fund were all working on ways "to resolve the problems of the Irish banking sector".
But eurozone sources said that although the mission would focus mainly on helping the banking sector, there was an agreement in principle to trigger aid for Ireland when the joint mission completes its consultations – perhaps in days – and that the aid would not be just a programme for the banks.
Klaus Regling, chief executive officer of the European Financial Stability Facility (EFSF), said he was confident that funding could be made available "very quickly" if Ireland requests it.
"Very quickly means within days," Regling told a press conference after Tuesday's talks.
Speaking after the meeting, French Economy Minister Christine Lagarde said she doesn't have "an exact calendar because there are works under way which are intensifying in a targeted and rapid way, to explore the whole variety of necessary measures".
"If you ask me whether that is a question of six months or of days, I would say we are closer to a question of days rather than six months."
The ECB and some eurozone peers want Dublin to take a quick decision on applying for aid amid signs that market contagion is affecting fellow struggler Portugal and beginning to hurt Spain.
But Olli Rehn insisted that the situations in those countries were "very different" as Ireland is mainly faced with a banking sector problem while Portugal's woes were related to fiscal consolidation and structural reforms.
No 'haircut' for private bond holders
Juncker also denied suggestions that private bondholders would have to share the pain of a possible Irish sovereign debt default by accepting a "haircut" on their holdings.
The idea, floated earlier by German Chencellor Angela Merkel, has unsettled bond markets, which saw the debate as laying the ground for a potential default by eurozone countries such as Ireland, Portugal or Greece.
But Juncker said Merkel had been "misunderstood". "In no way will there be a private sector involvement" for Greece, Ireland or Portugal, Juncker stressed.
(EurActiv with Reuters.)