WRAPUP 7-EU/IMF team heads to Ireland to explore crisis steps

* IMF-Europe mission to visit Ireland from Thursday

* Austria says Irish corporation tax part of aid debate

* Irish finmin says corporation tax rate "safe"

* Britain says ready to help Ireland if needed

* Yields surge at Portugal debt auction

(Adds Austrian minister Proell, opinion poll)

By Carmel Crimmins and Jan Strupczewski

DUBLIN/BRUSSELS, Nov 17 (Reuters) - Ireland agreed on
Wednesday to work with a European Union-IMF mission on urgent
steps to shore up its shattered banking sector, a process that
could lead to a bailout despite Dublin's deep reluctance.

A team from the European Commission, the International
Monetary Fund and European Central Bank will travel to Ireland
on Thursday to examine what measures may be needed if Dublin
decides to seek aid, euro zone finance ministers said.

Irish Prime Minister Brian Cowen emphasised that the mission
would look at what assistance Ireland might require, again
rejecting suggestions his government was discussing a bailout.

"What we want to concentrate on now is in a focused way,
over coming days, to sit down and see in what way can assistance
be provided to ensure that these issues can be dealt with
properly and appropriately," he told parliament.

"There has been no question of the government ... (being) in
a negotiation for a bailout," he said, dismissing the term as
pejorative to hoots of opposition derision.

He later told RTE television there were "sensible,
precautionary discussions" under way. "It's urgent. We accept
it's urgent and we need to deal with it."

The EU's commissioner for economic affairs, Olli Rehn, said
the EU-IMF team would work intensively with Ireland "to
determine the best way to provide any necessary support to
address market risks, especially as regards the banking sector".

"This can be considered as an intensification of the
preparations for a potential programme if requested by the Irish
government and deemed necessary by the euro area member states,"
he told reporters after the finance ministers' meeting ended.

Irish Finance Minister Brian Lenihan said euro zone peers
had welcomed his four-year, 15-billion-euro budget-cutting
strategy which he hopes to publish next week, suggesting he sees
no need for further fiscal tightening. [ID:nLDE6AG0GB]

But he admitted the banking sector needed help.

"What may be required may not in fact be an actual transfer
of money now but demonstration of how much money can be made
available if further difficulties materialise," he said.

Ireland has said the bill for cleaning up its banks could
top 50 billion euros but investors fear the final figure could
be even higher given rising residential mortgage arrears,
deposit outflows and higher funding costs. [ID:nLDE6AB0CV]

Financial markets appeared unimpressed by Dublin's decision
to reject sovereign assistance, with the premium investors
charge for holding Irish 10-year bonds rather than German Bunds
holding at a near-record 575 basis points. [GVD/EUR]

LCH.Clearnet, a clearing house for sovereign debt, doubled
its margin requirement on Irish bonds to 30 percent of net
positions, an indication of the increased risk of default.

Underlining the fear that Ireland's problems could spread,
Portugal's borrowing costs soared at a treasury bill auction,
with yields for 12-month paper jumping more than 150 basis
points from a tender earlier this month. [ID:nLDE6AG0ZH]

Lenihan dismissed suggestions that Ireland should raise its
ultra-low 12.5 percent corporation tax rate to help cut its
debt. Higher-tax countries, including Britain and Germany, have
long seen the Irish rate as a form of unfair competition.

"Of course our corporate tax rate is safe," he said.

Austrian Finance Minister Josef Proell, however, was quoted
as saying the Irish corporate tax rate would have to be
discussed in any talks on aid, foreshadowing tough negotiations.

Proell earlier told Reuters Insider TV that other euro zone
countries were pressuring Dublin to seek a bailout to help
stabilise the euro and avoid a spillover to other countries.
[ID:nLDE6AG1S4]

"Contagion risk is one of the dangers that is behind our
pressure to Ireland to go under the umbrella," he said.

After Proell spoke, the Irish finance ministry said its
position was unchanged that the corporate tax was protected.

Ministers took a tough line on Tuesday with Greece, the
first country to receive an IMF-euro zone rescue, telling Athens
to cut its spending further to meet budget deficit reduction
targets agreed as part of its bailout.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a description of the EU safety net, click [ID:nLDE65718H]
For more on how Ireland might tap funds, see [ID:nLDE6AE1S3]
BREAKINGVIEWS column on Ireland, click [ID:nLDE6AF0LT]
Analysis on euro zone contagion risks, click [ID:nLDE6AG0UF]
Euro zone struggles with debt r.reuters.com/hyb65p
For multimedia coverage on the Euro Zone Crisis page on Top
News: r.reuters.com/hus75h
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

INEVITABLE?

While Ireland made no request for immediate EU rescue,
resisting pressure to follow in Greece's footsteps, economists
said a state bailout remained a probability even though its
public borrowing needs are funded until mid-2011.

"Will Ireland dig its way out of this hole without support?"
asked Commerzbank's Peter Dixon in a research note.

"Alas probably not, because it has lost market confidence
... In the absence of measures to restructure the banking debt,
we see a high probability that Ireland will ask for European
Financial Stability Facility funding early next year."

Some analysts said Dublin appeared to be playing for time
partly to avoid the political humiliation of applying for aid
before a key Nov. 25 parliamentary by-election. An opinion poll
released on Wednesday suggested Cowen's Fianna Fail party is set
to lose that vote anyway, reducing the governing coalition's
majority to just two seats. [ID:nLDE6AG20A]

EU sources have told Reuters 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.

Euro zone sources said there was an agreement in principle
to trigger aid when the joint mission completes its work --
perhaps in days -- and the aid would not be just for the banks.

Irish banks, pushed to the brink by the financial crisis and
a property collapse, came under further downward pressure, with
shares in Allied Irish (ALBK.I) falling anew. They have lost 70
percent of their value this year.

The bank, which will be more than 90 percent owned by the
state following a rights issue later this year, will issue a
trading statement later this week.

The country's largest lender Bank of Ireland (BKIR.I)
signalled last week that it had seen 10 billion euros in
outflows of deposits between early August and the end of
September.

But Bancassurer Irish Life & Permanent (IPM.I) said on
Wednesday it was confident Irish banks would be adequately
capitalised to deal with any downturn in the country's
residential mortgage market. [ID:nLDE6AG07Q]

After Greece's near collapse, the stakes are high. European
Council President Herman Van Rompuy, who heads the body that
groups the EU's 27 national governments, said the EU's future
could be at stake, although others played down those risks.

Britain, whose banks have around $150 billion of exposure to
Irish debt, said it stood ready to help, although it was unclear
what steps it might take to assist Ireland.

"Ireland is our closest neighbour and it's in Britain's
national interest that the Irish economy is successful and we
have a stable banking system," Chancellor of the Exchequer
George Osborne said. [ID:nLDE6AF2H5]
(Additional reporting by Dublin and Brussels bureaus and by
Emelia Sithole-Matarise in London, writing by Luke Baker and
Paul Taylor, editing by Mike Peacock and Susan Fenton)