THE GOVERNMENT IS COMING under increasing pressure from its European neighbours to accept a bailout from the European Union and the International Monetary Fund, amid concerns that its international isolation could spread to other Eurozone countries.

The euro rose this morning after Taoiseach Brian Cowen signalled that he may be prepared to consider measures to assist the country’s banks, Bloomberg reports.

Today’s Guardian leads with a report that, with the mounting debt crisis due to top the agenda at today’s meeting of Eurozone Finance Ministers, the European Union is now essentially demanding Ireland to seek financial assistance from overseas. The government is being further pressured by fears from the Spanish and Portuguese governments that the worsening Irish debt crisis would impact on them too.

The increasing nervousness of international investors about the prospect of an Irish default, and the rise in the cost of government borrowing for the Iberian nations, has led to anxiety in those countries that may also be forced to seek bailouts themselves.

As a result, Brian Lenihan had been expected to meet with continental demands that it seek a bailout and end the uncertainty over its fiscal future when he meets with his European counterparts at an emergency meeting of the EU’s finance and economics ministers tonight.

However, today’s papers suggest that this is still far from certain. The Irish Times leads with a report that the Taoiseach continues to insist Ireland will not seek a bailout from either Europe or the IMF, while the Independent’s front page headline declares “Lenihan to accept a bailout for the banks”.

‘Contagion’

The demands follow comments by the governor of Spain’s central bank that Ireland should seek an “appropriate reaction”, though he felt the worries about Ireland were “unfounded”; and remarks by Portugal’s finance minister that the worsening Irish situation was pushing his country towards a bailout. The Austrian central bank chief has also stated that Ireland should act quickly to stop fears ‘spilling over’ into other eurozone nations.

The Wall Street Journal today leads with Portugal’s plea that Ireland consider the fate of the rest of the eurozone, as Fernando Teixeira dos Santos once again turns up the heat on Ireland and seeks to create a so-called ‘firewall’ between the losses of the Irish banking sector and the economic stability of the other 15 eurozone members. Miguel Angel Fernandez Ordonez, who is both governor of the Spanish central bank and a member of the European Central Bank’s governing council, also urged Ireland not to put off decisions that could shore up confidence in its finances.

Back home, the government is not keen to seek a bailout before announcing the terms of its four-year economic strategy next week – an announcement it believes will ease the still-high price of national borrowing – or before it reveals the Budget on December 7.

The National Treasury Management Agency insists that the state is fully-funded until the middle of 2011, meaning that the instant cost of government bonds is not an immediate concern, but the response from the rest of Europe may cause a rethink of its current defiance on the requirement of outside help.