International Monetary Fund chief Dominique Strauss-Kahn said today that Ireland can manage its fiscal affairs well, and the fund has had no request for aid.
"I have not been in contact with Ireland," he told reporters on the sidelines of an Asia-Pacific summit in Yokohama, Japan. "So far I have not had a request, and I think Ireland can manage well..."
He said the IMF would be willing to help Ireland if needed in the future, but "until now it's business as usual".
Taoiseach Brian Cowen and the European Commission last night dismissed a report by Reuters news agency that Ireland was already in talks about a drawdown of funds from the EU's emergency fund.
"We have made no application whatever for funding. As the Minister for Finance has outlined, we have funding up to mid-year because of the pre-funding arrangements done by the National Treasury Management Agency,'' Mr Cowen said as he canvassed ahead of the Donegal South West byelection. "So the sovereign, if you like, has that funding arrangement in place. We don't have to borrow any money in respect of the sovereign issues that affect the Government . . .''
Ms Strauss-Kahn said he, too, was unaware of talks about an EU bailout for Ireland.
Two well-placed sources told The Irish Times, however, that Irish officials have been involved in ''technical'' discussions about the procedures to be followed in the event of any aid application being made to the European Financial Stability Facility (EFSF). Such discussions have come amid informal contact between Brussels, Berlin and other capitals to assess their readiness to activate the €750 billion rescue fund.
Euro zone sources told Reuters that aid discussions were under way. One official said it was "very likely" that Ireland would get financial assistance from the EU facility set up after Greece obtained a €110 billion bailout in May.
"Talks are ongoing and European Financial Stability Facility (EFSF) money will be used; there will be no haircuts or restructuring or anything of the kind," one euro zone source said. A second source confirmed the talks.
European Central Bank president Jean-Claude Trichet today declined to comment on the situation in Ireland, but said governments need to step up budget tightening.
Pressure on Irish bonds eased on yesterday after France, Germany, Italy, Spain and Britain, issued a statement confirming that holders of existing euro debt would not take a hit if the EU proceeded with plans to introduce a mechanism letting countries restructure their debt.
That sent waves of relief through markets fearing that the eurozone could be headed toward another debt crisis following the one with Greece earlier this year.
Mr Strauss-Kahn said Ireland's difficulties were much different from Greece's, however.
"The Irish situation is mostly linked to the problem of the banks, especially one big bank, not only one, but mostly one big bank. It's not the same thing as the Greece problem, which was at the same time a fiscal problem but also a competitiveness problem."
He said the Government has "taken a lot of measures to get back on track on the fiscal side".
The spread between the Irish 10-year bond yield and the German benchmark, which rocketed to a high of nearly 7 percentage points on Thursday, narrowed to about 5.8 percentage points yesterday.
Additional reporting: Reuters