There will be no need for the euro zone's emergency lending facility to be used after the announcement by Ireland and Portugal of additional austerity measures, the head of the facility said today.
The European Financial Stability Facility (EFSF) was set up this year to borrow cash on the market against up to €440 billion of joint euro zone government guarantees to help any euro zone member state that could not finance itself in the markets.
Rising costs of borrowing in Ireland and Portugal, boosted by market uncertainty over their ability to reduce budget shortfalls and debt, fuelled speculation that either Dublin or Lisbon would eventually have to apply for EFSF help.
"My central scenario, that the EFSF will not need to become financially operational, was also confirmed this morning, in particular because countries announced additional consolidation steps," EFSF chief Klaus Regling told a news conference following a meeting of euro zone finance ministers.
Luxembourg prime minister Jean-Claude Juncker, who chairs the meetings of euro zone finance ministers, also said Ireland would not need EFSF help, despite a bill of almost €40 billion to restructure its banking sector.
"My impression is not that Ireland would have to step under the European umbrella. We are of the view the Irish government can resolve its banking problems without European help," Mr Juncker told reporters.
Central bank Governor Patrick Honohan said Ireland's bill for cleaning up its banking system is "colossal" but not so big as to necessitate outside help, such as from the euro zone's bailout fund.
"It's still a figure that can be worked out. Other countries have done it, we've done it ourselves, work out of a situation like this, without external help," Mr Honohan told RTÉ in an interview after announcing a bill of up to €34 billion for dealing with nationalised Anglo Irish Bank.
Reuters