The European Union approved an 85 billion euro ($115 billion) rescue for Ireland on Sunday, an EU source said, and was set to announce outlines of a permanent system to try to resolve Europe's spreading debt crisis.
Finance ministers from the 16-nation eurozone, anxious to prevent financial market contagion from engulfing Portugal and Spain, endorsed an emergency loan package to help Dublin cover bad bank debts and bridge a huge budget deficit.
The Irish Finance Ministry said Prime Minister Brian Cowen, whose unpopular government is close to collapse over the EU/IMF bailout, would make a statement at about 1815 GMT.
A German coalition source said ministers would also discuss Portugal and its possible need of an EU bailout, but EU sources later said they would not look at specific countries other then Ireland. Under pressure to take dramatic action to arrest a systemic threat to the euro, the leaders of Germany and France, the EU's two central powers, agreed in principle with top EU officials on the broad outlines of a permanent crisis-resolution mechanism.
Crucially, private bondholders could be made to share the burden of any future sovereign debt restructuring of a eurozone country, subject to a case-by-case evaluation "without any automaticity", a senior EU official said.
International Monetary Fund procedures would apply, he said. The IMF's "lending into arrears" policy stipulates that the Fund will lend to a country that is making good-faith efforts to come to an agreement with bondholders.
The IMF favours so-called Collective Action Clauses in sovereign bonds, enabling a majority of bondholders to impose restructuring on others.
The heads of the European Commission, the European Central Bank, the European Council and eurozone finance ministers discussed the Franco-German proposal by telephone on Sunday. All 27 EU finance ministers were expected to endorse the broad outlines of the longer-term plan before markets open in Asia on Monday, the source said.
"You know that we have a very serious situation, we have to do our utmost to protect the foundations of our economic recovery," EU Monetary Affairs Commissioner Olli Rehn told reporters on arrival for the Brussels talks.
He said ministers would go beyond endorsing the EU/IMF aid package for Ireland and "discuss the systemic response to this crisis". But it was unclear how much detail would be announced about a long-term financial safety net.
The lack of detail in an earlier Franco-German deal on a permanent crisis mechanism, agreed last month, and talk of private investors having to take losses, or "haircuts", on the value of sovereign bonds, helped drive Ireland over the cliff.
EU sources said a team of specialists from the Commission, the ECB and the International Monetary Fund had finalised a deal with Irish authorities in Dublin after 10 days of negotiations.
However, some key details, notably the interest rate and the term of the loans, expected to be between three and six years, would be finalised by ministers. French Economy Minister Christine Lagarde said the loans would total 85 billion euros.
The EU sources said 35 billion euros was earmarked to help restructure and recapitalise Ireland's shattered banks, while 50 billion euros would go to help fill the hole that guaranteeing bank debts has blown in public finances.
With anxiety rattling bond markets, the Irish government has been under intense pressure to accept a bailout despite repeatedly saying in recent weeks that it did not need one.
European leaders are hoping that the package for Ireland, drawn from a 750 billion euro rescue fund agreed by the EU in May this year, will convince markets that the crisis can be contained and spare Portugal and Spain.
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