A financial aid plan to help Ireland cope with its battered banks will be unveiled next week, EU sources said on Friday, but experts warned a rescue may not be enough to prevent contagion in the single currency bloc. The euro rose and the risk premium investors demand to buy Irish and other peripheral eurozone debt instead of benchmark German bonds narrowed in a sign of optimism that an aid deal for Dublin will be sealed soon.
But a poll of participants at a high-level banking congress in Frankfurt showed that nearly three quarters believed the crisis that has shaken the eurozone for a full year would rage on even after an Irish rescue and ensnare other financially weak countries such as Portugal.
"As long as the fundamentals don't improve, the pressure will continue on other countries too," Daniel Gros, who heads the Centre of European Policy Studies, told Reuters Insider TV at the congress. "The problem is that no problems are currently being solved. Many believe that the eurozone is just moving from one crisis to the next."
Ireland's central bank chief has acknowledged that the country needs a loan running into the tens of billions of euros to shore up an extremely fragile banking sector that has grown dependent on ECB funds. Reflecting concerns among other eurozone periphery countries that Ireland's financial troubles could spread, Greece's finance minister pressed Dublin to move fast.
Irish community minister Pat Carey said the government would publish the details of a four-year fiscal plan to save 15 billion euros early next week. EU sources said the financial aid plan for Ireland would be presented at roughly the same time.
Sources have told Reuters Ireland may need assistance of between 45 billion and 90 billion euros, depending on whether it needs help only for its banks or for public debt as well. The head of the euro zone's temporary fiscal safety net, from which funds could come, said aid could be raised in five to eight days if needed, notably from investors in Asia.
"We are confident that we can raise the necessary funds from institutional investors, central banks and sovereign funds, in Asia in particular," Klaus Regling, chief executive of the European Financial Stability Facility, told French daily Le Monde.
Carey said it was impossible to say how much aid Ireland would need until a joint mission of the European Commission, European Central Bank and International Monetary Fund, which arrived in Dublin on Thursday, had gotten to grips with the state of the banks. Banks in Ireland have been largely shut out of market lending due to concerns about their solvency. They are almost entirely reliant on funding from the ECB, which reached 130 billion euros by end-October, plus an extra 35 billion euros from the Irish central bank.