The Fine Gael leader Enda Kenny has said that there is considerable resistance among fellow centre-right EU leaders to any moves towards burden-sharing by senior bondholders in the banking sector.
Speaking during a summit of the European People's Party in Helsinki, Mr Kenny said, however, that there was substantial goodwill towards the problems facing the Irish economy.
Meanwhile, Europe's socialists have said the EU must grant lower interest rates to Greece and Ireland and create a 'robust' emergency loan mechanism at upcoming summits this month.
Poul Nyrup Rasmussen, head of the Party of European Socialists (PES), told a news conference in Athens that the message to EU leaders should be: 'It's time for you to decide to bring down the interest rate for Greece and Ireland.' Labour leaders Eamon Gilmore was among the leaders meeting in Athens.
Merke wants 'convincing' response
European leaders must deliver a convincing response to the euro zone's debt crisis regardless of a European Central Bank threat to raise interest rates, German Chancellor Angela Merkel said today.
She was speaking after ECB President Jean-Claude Trichet shocked markets yesterday by saying the central bank may increase rates as early as April due to inflation risks.
After talks with Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro area finance ministers, on preparations for two crucial summits this month, Merkel said they had agreed to do everything to keep the euro strong.
'Regardless of the question of the ECB and interest rates, we know that we need to put a joint package for the euro zone on the table,' she told a joint news conference.
She stressed Germany's priorities to strengthen fiscal discipline and boost economic competitiveness in the 17-nation single currency area, but did not rule out allowing the euro zone's temporary rescue fund to buy government bonds.
Asked about letting the European Financial Stability Facility purchase bonds of vulnerable members states, Merkel said: 'There is a lot of discussion going on about possible options and these need to be examined.'
The German government and the Bundesbank have publicly opposed allowing the EFSF to buy bonds or lend money to fund debt buy-backs by states in difficulty.
EU diplomats say Germany is waiting to see what commitments other countries are prepared to give at a March 11 euro zone summit before showing its hand on the rescue fund and whether to allows its full €440 billion to be lent out.
Analysts said the ECB move raised pressure on EU leaders to agree on decisive action at two crucial summits this month. Failure would risk a savage market backlash, probably first against Portugal which is seen as the likeliest candidate to follow Greece and Ireland in needing a bailout.
The ECB did, though, decide yesterday to keep offering banks unlimited liquidity until mid-year, something Portuguese banks have relied upon.
Prime Minister George Papandreou of Greece, the first country to require a euro zone bailout, warned EU leaders of a bond market backlash against the euro zone if they fail to take bold decisions at this month's summits.
European Monetary Affairs Commissioner Olli Rehn also cautioned that a successful outcome to the sovereign debt crisis 'is by no means guaranteed'. Speaking at a Bank of France conference in Paris, Rehn said EU fiscal reforms must ensure sanctions for 'irresponsible behavour' were more automatic and less subject to political deliberation.
IMF reduces interest rate on Irish rescue loan
The interest rate on Ireland's International Monetary Fund loan will be reduced under changes in member countries' subscriptions and voting shares that came into effect yesterday, the IMF said.
Under the changes, which were first approved in 2008 to give emerging markets a greater say in the IMF, Ireland's subscription, or quota, will increase. 'This reduces the share of Ireland's credit that is subject to surcharges,' the IMF said in a statement.
The increase comes into effect as soon as the country pays its additional subscription to the IMF, the fund said.
A second round of quota increases, approved last year, will further reduce the average lending rate once countries' governments have approved those changes.
The IMF contributed €22.5 billion to an €85 billion joint IMF/EU rescue for Ireland on November 28 to help restructure Irish banks.
Based on current interest rates for IMF special drawing rights of 0.43%, the Fund said the average lending rate on its loan to Ireland will decline to 3.04% on credit outstanding less than three years. This is down from 3.17%.
For credit outstanding for longer than three years, the rate falls to 3.85% from 4.04%, the IMF said. The IMF had signalled the reduction in January.
