DUBLIN – Europe’s debt crisis saw new ripples Monday, with Irish officials denying that their talks with other eurozone governments were aimed at getting a bailout, and the Greek premier accusing Germany of making things worse with talk of forcing creditors to take losses.

The flare-up in tension added to pressure on EU finance ministers, who will be in Brussels today for their monthly meeting.

After spending their recent gatherings focusing on crisis prevention, a weeklong sell-off of Irish and Portuguese bonds has thrown them back into crisis management.

The Irish Department of Finance said in a statement Monday that it was pursuing “contacts at official level” with other eurozone governments and the EU, but aides to Finance Minister Brian Lenihan emphasized Ireland has no need for a lifeline from the $975 billion financial backstop for the eurozone. Ireland says it had enough cash to last through mid-2011.

Greek Prime Minister George Papandreou, meanwhile, said German pressure to create a mechanism that would let governments default on their debts in the future was scaring off desperately needed investors.

“Whether understood or misunderstood (the German proposal) created a spiral of higher interest rates for the countries that seemed to be in a vulnerable position — such as Ireland and Portugal,” Papandreou said in a speech in Paris. “But this could break backs. This could force people into bankruptcy.”

Advertisement

Papandreou’s comments came as the EU’s statistics agency said Greece’s 2009 deficit had reached 15.4 percent of GDP, up significantly from a previously estimated 13.6 percent. While the upward revision had been well telegraphed to the markets, it underlined the difficult task Athens faces in getting its deficits below 3 percent by 2014, as specified in its $147 billion bailout agreement in May.

Analysts said investors needed the finance ministers in Brussels to offer a clear path forward for Ireland to reduce its deficit and bear the costs of its enormous bank bailout. Otherwise, markets would continue to dump the bonds of the EU’s peripheral nations.

Ireland is struggling to slash a budget shortfall that will likely balloon this year to a staggering 32 percent of GDP — a record for postwar Europe. The government’s budget dropped deep into the red after its $54.8 billion rescue of five banks that were hit hard when the country’s real estate bubble burst in 2008.

 


Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.