Ireland's bailout inflames taxpayers

Ireland's international bailout failed to convince bond investors Monday that Europe's debt crisis has been contained, and it outraged many in the country with a requirement that state pension funds will be used to protect foreign creditors.

EU lawmakers approved the bailout by the European Union and the International Monetary Fund on Sunday.

In Dublin, Irish Prime Minister Brian Cowen said his country will take 10 billion euros ($13.4 billion Cdn) immediately for Ireland's cash-strapped banks out of a total of 67.5 billion euros ($91 billion Cdn) in loans.

That cash injection lifted the shares in Ireland's bankssharply on Monday.

"Of course the bank shares will rise," David McWilliams, a former Irish Central Bank economist,said. "We've just put 10 billion in their pocket."

The euro, however,fell 0.9 per cent to a new two-month low of $1.3121 US in North American trading late in the day.

And the Irish were shocked by a key condition for the rescue that Ireland use 17.5 billion euros ($23 billion Cdn) of its own cash and state pension reserves to shore up its public finances, which have been burdened by the government's bailout of banks' ill-fated risk-taking.

Opposition leaders and some economists warned that the EU-IMF credit line's average interest rate of 5.8 per cent would be too high to repay, and they questioned why senior foreign bondholders in Ireland's banks chiefly other banks in Britain, Germany and the U.S. weren't expected to bear part of the cost.

"This is not a rescue plan," said Fintan O'Toole, a commentator and author. "It is the longest ransom note in history: do what we tell you and you may, in time, get your country back."

The senior IMF negotiator, Ajai Chopra, insisted the interest rate was reasonably cheap and its redeployment of Irish pension funds the most cost-efficient course to take.

'This is not a rescue plan. It is the longest ransom note in history.' Fintan O'Toole, Irish author

"It's clearly much better than what Ireland could get if it had to borrow on the market right now," said Chopra.

"As the program begins to work, we would expect that Ireland would be able to go back into the markets and borrow again," he said.

Average yields on the debt of other debt-burdened European economies rose as lenders demanded a better return for what they perceived as a higher risk of default.

Yields on the10-year debt of Greece, Ireland, Portugal, Spain and Italy reached euro-era record highs as speculation intensified that other nations will require external support.

Besides the immediate 10 billion euros to boost the Irish banks' cash reserves, the deal offers 25 billion euros more if the banks still have trouble borrowing on markets.

The remaining 50 billion euros of the bailout loans is earmarked for use to cover Ireland's expected deficits through 2014.