BERLIN (MNI) – Eurogroup president Jean-Claude Juncker said Monday
that Ireland’s decision to accept aid from the EU and the International
Monetary Fund will prevent a contagion effect in Portugal from the Irish
debt crisis.

“There will be no contagion because we’re not abandoning Ireland to
its fate but are aiming in a joint effort…to get the Irish train on
the rail again,” Juncker, who is also the prime minister of Luxembourg,
told German public radio Deutschlandradio Kultur.

Late Sunday night, Ireland formally requested aid from the European
Union and the International Monetary Fund. The aid package, the details
of which will be negotiated over the next several weeks, is expected to
be worth about E80 billion to E90 billion, a source told Market News
International.

Juncker also noted in the radio interview that there is “no
perceptible parallel” between the Irish and the Portuguese situation.
“The Portuguese banking sector is actually in a relatively healthy
state,” Juncker asserted.

Portugal will be able to bring back its deficit below the 3%-of-GDP
limit set under the EU Stability and Growth Pact, the Eurogroup
president predicted.

Juncker criticized Germany for its demand that private creditors
should participate in future bailouts of Eurozone member states after
the current EU rescue fund expire in mid-2013.

“The debate by itself, which started two weeks ago, has led to
[rising] risk premia [on government bonds] of Ireland and other
countries in the Eurozone periphery,” the Eurogroup chairman noted.
“This shows how sensitively financial markets react to such kind of
debates.”

Juncker reaffirmed that he does not support the German proposal to
make creditors shoulder losses even if a debt crisis is caused by
governments. “In that case we would be contributing to investors shying
away from the periphery of the Eurozone,” he warned.

ECB Executive Board member Lorenzo Bini Smaghi, in a newspaper
interview published Sunday, also warned that German efforts to make
creditors participate in future bailouts of Eurozone member states risk
driving away investors in droves. “This would be a recipe for sheer
catastrophe,” he said.

However, German Finance Minister Wolfgang Schaeuble, in an
interview with Germany’s ZDF television aired on Sunday, again argued
that creditors should shoulder part of the cost in future rescue
measures after the expiration of the current EU rescue facility.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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