Euro eases, bond spreads edge higher after early gains BRUSSELS/DUBLIN: A financial aid plan to help Ireland cope with its battered banks will be unveiled next week, EU sources said Friday, but experts warned a rescue may not be enough to prevent contagion to other euro zone members. Europe's single currency fell back late in the day and the risk premium investors demand to buy Irish debt instead of benchmark German bonds remained high as optimism about an aid deal was tempered by a sense the crisis is far from over. A poll of participants at a high-level banking congress in Frankfurt showed nearly three quarters believe the turmoil that has shaken Europe's currency bloc for much of the past year would rage on even after an Irish rescue, ensnaring other financially weak countries like Portugal. “As long as the fundamentals don't improve, the pressure will continue on other countries too,” said Daniel Gros, head of the Centre of European Policy Studies in Brussels. “Many believe the euro zone is just moving from one crisis to the next.” Ireland's central bank chief has acknowledged the country needs a loan running into the tens of billions of euros to shore up a fragile banking sector that has grown dependent on ECB funds and seen an exodus of deposits over the past six months. Allied Irish, once the country's largest listed lender, announced that customer accounts had plunged by 13 billion euros so far this year and that mortgage book arrears had continued to rise in the third quarter. AIB is relying on the Irish government to bail it out after years of loose lending to property developers left it with a gaping capital hole in excess of 10 billion euros. Unclear on aid amount Irish Community Minister Pat Carey said the government would publish the details of a four-year fiscal plan to save 15 billion euros early next week. EU sources said the financial aid plan for Ireland would be presented at roughly the same time. Sources said Ireland may need assistance of between 45 billion and 90 billion euros, depending on whether it needs help only for its banks or for public debt as well. The head of the euro zone's temporary fiscal safety net, from which funds could come, said aid could be raised in five to eight days if needed, notably from investors in Asia. “We are confident that we can raise the necessary funds from institutional investors, central banks and sovereign funds, in Asia in particular,” Klaus Regling, head of the European Financial Stability Facility, told French daily Le Monde. Carey said it was impossible to say how much aid Ireland would need until a joint mission of the European Commission, European Central Bank and International Monetary Fund, which arrived in Dublin on Thursday, had a good look at the banks. Markets calmed in recent days after it became clear Ireland was on track to receive aid, but remained jittery on Friday. The euro briefly pushed up above $1.3720, only to fall back to $1.3660 in late European trading. The spreads of Irish 10-year bonds above German benchmarks drifted down towards 5.4 percentage points before pushing back up to 5.6 points, dragging Greek, Portuguese and Spanish debt alongside.
