Europe set to bail out Ireland as debt crisis grows

* Ireland would be second euro country to get emergency aid

* EU finance ministers to meet in Brussels on Sunday

* Sarkozy talks with Germany, Italy, Spain, Portugal leaders

By Carmel Crimmins and Luke Baker

DUBLIN/BRUSSELS, Nov 28 (BestGrowthStock) – European ministers are
expected to sign off on an 85 billion euro ($112.7 billion)
rescue for Ireland on Sunday, making it the second euro member
after Greece to require a bailout in the face of a crippling
debt crisis.

Finance ministers from the 16-nation euro zone are due to
meet in Brussels from 1 p.m. (1200 GMT) to discuss the emergency
loan package Ireland needs to stem mounting losses at its banks
and cope with a massive budget deficit.

Ministers from the broader 27-nation European Union will
also gather to approve the aid, which will come from a 750
billion euro rescue facility the bloc set up back in May after
Greece was pushed to the brink.

By committing funds for Ireland, Europe hopes to draw a line
under a crisis that has severely dented confidence in the
12-year old currency bloc.

But investors could soon turn their attention to other
high-deficit countries like Portugal or Spain in what is turning
into a high-stakes showdown between markets and politicians.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For an interactive timeline on the Eurozone debt crisis in
2010, click on http://link.reuters.com/nyx95q

For Take a Look, click [ID:nLDE68T0MG]

For multimedia coverage on the Euro Zone Crisis page on Top
News: http://r.reuters.com/hus75h

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

In a flurry of phone calls over the weekend, French
President Nicolas Sarkozy spoke with the leaders of Germany,
Italy, Spain and Portugal, underscoring the seriousness of a
crisis that has been haunting the euro zone for the past year.

Tens of thousands of Irish took to the streets of Dublin on
Saturday to protest against the looming bailout and Irish
opposition parties warned they would not accept a deal that
imposed high interest rates on the EU/IMF loans.

The parties, Fine Gael and Labour, are expected to rout
unpopular Prime Minister Brian Cowen’s Fianna Fail party in an
election that is likely to take place within months. They have
said they would be bound by a rescue deal but may try to
renegotiate details.

Both parties want bond investors who lent money to Irish
banks to take on a bigger share of their country’s bailout
burden, rather than foisting it all on Irish taxpayers.

Jitters sent the shares of European banks which hold the
debt of Irish banks tumbling on Friday. The euro also fell to a
two-month low against the dollar and the borrowing costs of
peripheral euro zone countries like Ireland, Portugal and Spain
stood near record highs.

PORTUGAL AND SPAIN

European officials have been at pains to play down the links
between Ireland and Portugal, which is widely seen as the next
euro zone “domino”. Troubles in Portugal could spread quickly to
its larger neighbour Spain because of their close economic ties.

Unlike the other financially weak countries on the euro
zone’s southern periphery, Spain is on track to meet its deficit
reduction targets and Prime Minister Jose Luis Rodriguez
Zapatero has ruled out seeking aid. [ID:nLDE6AQ038]

Nevertheless, the government in Madrid has taken a number of
steps to reassure markets about its finances in recent days,
announcing that it will publish monthly updates on its public
debt and move quickly to reform the pension system.

Greece, which secured a 110 billion euro rescue half a year
ago, is struggling to meet its deficit targets and local
newspaper Realnews quoted a senior IMF official on Saturday as
saying the country’s loan repayment period could be extended by
five years to make it easier to service its debt.
[ID:nLDE6AQ08L]

Such a move could meet strong resistance in countries like
Germany, which as Europe’s largest economy is shouldering the
biggest share of the rescues.

A weekend Emnid poll in weekly magazine Focus showed that 48
percent of Germans are in favour of supporting countries like
Greece and Ireland, while 47 percent oppose it.
(Editing by Ralph Boulton; writing by Noah Barkin)

Europe set to bail out Ireland as debt crisis grows