Ireland is praying it will not become the second euro zone nation to need a financial bailout [Reuters]

The Irish government has said that it is in "continuous talks" with the European Union over the country's debt crisis, but denied that direct discussions about a bailout were taking place. 

Over the past few days, EU sources have repeatedly been quoted as saying that talks on a possible bailout were under way and that Ireland, with borrowing costs dramatically increasing, was unlikely to hold out without assistance.

But Dick Roche, the junior minister for European affairs, told Newstalk radio on Monday that reports that Ireland needed funds from the International Monetary Fund (IMF) or EU were "simply wrong".

"There is continuous talk going on backwards and forwards about the level of our debt but the suggestion that constitutes going to the IMF or the bailout is just irresponsible," he said.

Roche said that were the reports about Ireland's situation were to continue "it could be very, very dangerous".

The country's borrowing costs shot to record highs in the past week on concerns about a deficit set to hit 32 per cent of gross domestic product this year and worries private bondholders could be forced to take asset value reductions on their holdings.

Funding questions

The Irish Independent newspaper said on Monday that Brian Lenihan, the finance minister, may ask his European counterparts in Brussels on Tuesday if it would be possible to funnel funds into Irish banks.

"There is no question about Irish sovereign debt - the question remains about the funding of the banks. The banks are having trouble getting money," the newspaper quoted a source as saying.

"We have to find out - could you go to the fund and get money for the banking sector? Lenihan at Ecofin [The EU Economic and Financial Affairs Committee] presents an opportunity to discuss it. It would be the banks that would have to pay it back - not the state."

The Irish government has already promised to pump up to $68.38bn into the banks, which currently have outstanding European Central Bank loans of $177bn, according to the Irish central bank.

Roche's remarks on Monday was just the latest in a string of denials aimed at stopping the issue increasing investor concerns.

Ireland would become the second country in the euro zone after Greece to obtain an international rescue package.

European persuasion

But Batt O'Keeffe, the Irish minister of enterprise, trade and innovation, said Ireland was not in a similar economic situation as Greece and therefore did not need assistance.

"This is definitely a markets led pressure, it is not incumbent on the Irish government that it needs funding now, but I think it will be persuaded over the next few days or maybe weeks"

Howard Wheeldon,
BGC International

"We have every confidence that we will be able to manage this economy," O'Keeffe said.

"It's been a very hard-won sovereignty for this country and this government is not going to give over that sovereignty to anyone."

The EU is keen for Ireland to accept aid, sources told Reuters news agency, to avert a Greek-style scenario where budget problems in one country plunge the entire euro zone into crisis.

Howard Wheeldon, a senior strategist at BGC International brokers, told Al Jazeera that he believed that Ireland could out until at least next June.

"But the point is that the markets and indeed the European authorities have decided that should not be the case and Ireland should be persuaded to go to the IMF [International Monetary Fund] and the European stability fund as of course Greece did earlier," he said.

"This is definitely a markets led pressure, it is not incumbent on the Irish government that it needs funding now, but I think it will be persuaded over the next few days or maybe weeks."

'Billions sought'

Unnamed EU officials have been quoted as saying the range of aid under discussion was $63bn to $123bn, depending on whether Ireland needed support for its banks, driven into debt by the financial crisis and a property market crash.

Such aid, if it were needed, could come from an initial EU bailout mechanism or from the $600bn European Financial Stability Facility (EFSF) set up after Greece was forced to seek help in May.

One of the sources said Dublin was not keen on applying for emergency funding, but that it may not have a choice if it came under renewed attack in financial markets.

However, Jean-Claude Juncker, the chief of the Eurogroup, which would have to validate any request for money, on Friday also issued a categorical "no" when asked if Ireland had sought aid.

He said such talks "are not conducted in public" and added that "there is nothing serious under way".

The Irish government is drawing up a four-year plan to cut a deficit that has crossed 30 per cent of gross domestic product (GDP) this year, while seeking to pass a December 7 budget that contains about $8.2bn in spending cuts and tax rises.

Source: Al Jazeera and agencies