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Irish PM fights for survival as euro fears resurface
  • | AFP | November 24, 2010 09:30 AM

Irish Prime Minister Brian Cowen battled for his political survival Tuesday, while Germany said Ireland\'s international bailout showed the future of the euro itself was on the line.

Irish Prime Minister Brian Cowen leaves after speaking to the media at the Government building in Dublin, on November 22.

The efforts of the European Union and the International Monetary Fund to shore up the debt-laden Irish economy were called into question as the euro sank to a two-month low, dipping under 1.34 dollars.

As anger at Cowen and the Irish government grew at home, Portugal -- tipped to be the next eurozone economy to need a bailout -- was bracing for a general strike on Wednesday.

German Chancellor Angela Merkel said: "We now have the difficulties in Ireland, different from those in Greece but which are no less worrying.

"We find ourselves in an extraordinarily serious situation."

Cowen faced fresh calls from opposition parties for a snap election, after saying Monday he would go to the polls early next year but only when he had seen through a budget considered crucial to obtaining the EU and IMF loans worth up to 90 billion euros (122.5 billion dollars).

Denying he was clinging to office, Cowen told a sombre parliament that passing the budget, which he has promised to submit on December 7, was his first priority and overrode any other political considerations.

"There is no question of the characterisation of clinging to office being my motivation. That is not my motivation," he told lawmakers.

Cowen said he expected the various budget laws would be passed by parliament.

"I believe there will be support for this budget," he said.

"This is a matter of national importance to us all for the country... for the future of everyone.

"The best statement of confidence for this country is to pass this budget," Cowen said.

The budget will be preceded by the publication Wednesday of a four-year roadmap of austerity measures.

The parliament is unlikely to vote on the budget until January, meaning that an election could not take place until February or March.

But Sinn Fein, which has four lawmakers in the parliament, or Dail, tabled a motion of no confidence in Cowen on Tuesday, saying that his government was a "charade which is an insult to the Irish people".

The government was rocked after a week of negotiations in which it insisted Ireland did not need external help, only to then cave in and request assistance.

Ireland follows Greece as the second country in the 16-member euro area this year to need a bailout amid grave concern in the EU that other heavily indebted euro economies such as Portugal could be sucked into the crisis.

In Berlin, German Finance Minister Wolfgang Schaeuble told parliament his government was acting with its European partners to bail out Ireland because the single European currency was "at stake".

Justifying the cost of the Irish bailout, Schaeuble said Germany must take responsibility "otherwise there will be untold economic and social consequences for our country".

The EU\'s economic affairs commissioner, Olli Rehn, insisted the political upheaval in Dublin will not jeopardise the rescue deal.

But he reiterated the Irish government\'s four-year budget plan forms the cornerstone of the bailout negotiations.

"It is essential that Ireland will pass the budget in the timeline foreseen and certainly sooner rather than later because every day that is lost increases uncertainty," he told RTE.

In Copenhagen, Prime Minister Lars Loekke Rasmussen said Denmark, which is outside the eurozone, was preparing a bilateral loan to Ireland, but he did not specify the amount.

"We are a small, open economy and it is in our interest that there is economic and financial stability in Europe," he said.

Stocks in British banks also fell in London amid fears of their exposure to the Irish economy as traders anxiously watched the political fallout and its potential effects on the 16-nation eurozone.

Mounting opposition to Cowen\'s government came to a head following its decision Sunday to accept a bailout for a country ravaged by the global financial crisis and the bursting of a property bubble.

In a shock move Monday, Green Party leader John Gormley, whose party has six lawmakers in the Dail, called for an election in January to provide "political certainty" for voters who felt "misled and betrayed".

The EU has agreed in principle to dip into a 750-billion-euro fund, the European Financial Stability Facility, set up in May after a 110-billion-euro EU-IMF bailout of Greece.

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