Czech Republic to take part with EUR 272.3mn in Ireland bailout.

By bne IntelliNews November 29, 2010
The Czech Republic will participate in the EUR 85bn rescue package for Ireland, agreed by the European Union and the International Monetary Fund, by providing guarantees worth CZK 6.7bn (EUR 272.3mn), CTK newswire cited deputy finance minister Tomas Zidek as saying. The Czech participation represents reserve from unpaid obligations to the EU budget and in case that Ireland fails to repay the provided financial assistance under the European Financial Stabilisation Mechanism (EFSM), the country will have to pay CZK 13.4bn to the EU budget, Zidek said. The EFSM is a EUR 60bn fund overseen by the European Commssion. Zidek underlined that the EFSM has already been approved by the previous cabinet - the interim government of PM Jan Fischer, so the government and the parliament wont have to approve the guarantees. Contrary to the stance of finance minister Miroslav Kalousek, Zidek admitted the possibility that the non-euro Member States might also participate in the yet to be agreed permanent crisis resolution mechanism which is to replace EFSM and enter into force as of 2013. Still, the government is yet to decide on this issue. The leader of the centre-left opposition party CSSD, Bohuslav Sobotka, said it will not be fair for the Czech Republic to be paying for ill-managed fiscal policies of other EU countries. Earlier analyses have shown that the Czech economy is not directly threatened by the sovereign debt and banking sector problems in Ireland as local commercial banks have minimum exposure to Irish bonds, while the foreign trade with the country is small. Still, the Irish crisis might have an indirect impact through eventual slowdown of the EU economic recovery which is to hamper the highly export-oriented local economy, as well as through higher risk premiums, which might translate to higher interest rates and limit credit growth. Central bank governor Miroslav Singer have also said that the Irish crisis will not to a great extent affect the national economy as it has not yet impacted the core of the EU, where the countrys major export markets are.

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