Finance ministers from the 16 eurozone countries have approved a multi-billion-euro rescue package for Ireland and its embattled economy.

"The final agreed program represents the best available deal for Ireland," said Irish Prime Minister Brian Cowen. "It allows us to move forward with secure funding for our essential public services, for our welfare state, for the most vulnerable members of society that depend on them.

"And it provides Ireland with vital time and space to successfully and conclusively address the unprecedented problems we have been dealing with since this global economic crisis began," he added.

Team effort to bridge budget gap

A team of specialists from the European Commission, the European Central Bank and the International Monetary Fund (IMF) hammered out a deal in Dublin earlier Sunday for an 85-billion-euro ($112.5-billion) package of loans to bridge a massive budget deficit and cover looming bank debts in Ireland.

Dutch Finance Minister Jan-Kees De Jager said the International Monetary Fund, the eurozone nations and the European Commission will all be involved in the bailout, adding that it will also include bilateral loans from Britain, Sweden and Denmark.

"We are standing foursquare behind the euro and for stability in the eurozone," De Jager told reporters on Sunday.

Another eurozone rescue deal

Investors are worried that the troubled economies of Portugal and Spain could follow Ireland, and German and French officials called for a rapid conclusion to the Irish talks to put an end to the uncertainty.

At a meeting of finance ministers in Brussels on Sunday, all 27 EU nations ratified the eurozone plan to grant financial assistance. They also approved the basis of a future crisis-resolution mechanism proposed by Paris and Berlin.

Germany and France have been keen to outline details of the permanent crisis mechanism, which was outlined only broadly last month. Uncertainty about precisely how such a mechanism would work, with concern about private investors having to sustain losses, is believed to have contributed to the Irish crisis.

Case by case liability for investors

Under the terms, EU Monetary Affairs Commissioner Olli Rehn said that private bondholders could be made to share the burden of future sovereign debt restructuring, adding that this would be decided on a case by casis - rather than an automatic - basis.

Decisions about whether bondholders would have to contribute would be decided in accordance with IMF rules, Rehn said.

This Irish rescue package will be the second such deal for a eurozone country this year after the EU and the IMF gave Greece 110 billion euros in aid in May.

As in the case of Greece, the Irish package hinges on an austerity plan unveiled last week.

That four-year plan includes 10 billion euros in spending cuts, 5 billion euros in tax hikes and the slashing of 25,000 public sector jobs.

Cowen said Ireland expects to pay an average interest rate of 5.8 percent a year on the loans, although this would be subject to market conditions. He added that this was a better rate than Dublin could expect on the financial markets.

Protestors in Dublin denounced the bailout and austerity measures on Saturday, waving signs saying "Eire not for sale, not to the IMF" and "There is a better, fairer way."

Cowen has also faced intense pressure to quit. His party Fianna Fail lost a by-election on Friday, narrowing their coalition's parliamentary majority to a precarious two seats.

Author: Holly Fox, Martin Kuebler, Richard Connor (AFP, AP, Reuters)
Editor: Kyle James, Ben Knight