November 23, 2010 / 3:40 PM / 9 years ago

Ireland talks on track, political steps needed: IMF

NEW YORK (Reuters) - Talks between Ireland and the International Monetary Fund are moving forward quickly but it is up to the Irish government to make the necessary political decisions, the IMF’s first deputy managing director, John Lipsky, said on Tuesday.

Negotiations to rescue Ireland from its financial troubles were at risk as Irish Prime Minister Brian Cowen, strongly criticized for his handling of the crisis, faced calls for an early election.

“Obviously, our work there is technical, not political. But ultimately decisions have to be made by governments, not by technicians,” Lipsky told reporters in New York.

“The negotiations are proceeding quite well, quite rapidly. They’re very intense. Obviously there is a great focus on progressing this as rapidly as possible.”

Cowen has defied calls to quit, saying the national interest required that he press on to unveil on Wednesday a promised four-year austerity package — a condition for the country to receive an expected 80 billion to 90 billion euros in loans from the IMF and the European Union.

Lipsky said he wouldn’t like to speculate about the impact of political turbulence on the prospects of a rescue. He said history shows that leaders from different sides of the political spectrum have been able to agree on action at moments of great uncertainty.

Asked about fears of contagion from Ireland spreading to other financially weak members of the euro zone, he said there is hope that measures such as the European Financial Stability Facility will give confidence to investors and reduce pressure on other governments.

Debt costs for Portugal and Spain continued to rise on Tuesday, however, underscoring investor concerns that those countries could be next in line after Greece and Ireland.

Lipsky also said he believed UK authorities are prepared to handle any spillovers from the Irish crisis into banks with exposure to the country.

“Given that pressures on Irish banks have been building for some time, I’m sure the UK authorities are quite prepared,” he said.

Editing by James Dalgleish

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