Osborne Says U.K. Is Ready to Help Ireland

By MATTHEW DALTON

BRUSSELS—The U.K. is ready to help Ireland tackle its mounting debt problems, Chancellor of the Exchequer George Osborne said Wednesday.

"It's in Britain's national interest that the Irish economy is successful and that we have a stable banking system," Mr. Osborne said. "So Britain stands ready to support Ireland in the steps it needs to take to bring about that stability."

Mr. Osborne made the comments as he arrived for a meeting of finance ministers from the European Union, and minutes after European Commissioner for Economic Affairs Olli Rehn confirmed that the U.K.'s help is being sought as part of a financial support package for Ireland. Mr. Rehn said the question of a U.K. contribution arose because its banks have made big loans to Ireland.

"That is under discussion," Mr. Rehn said. "It is natural, because the United Kingdom and U.K. banks have a very significant exposure in Ireland. There is very strong interconnection in the banking sector and the financial sector between the two countries."

Mr. Osborne said at the G20 meeting in Korea earlier this month that the U.K. would be willing to support Ireland. Lending beyond its existing IMF and EU commitments though is problematic for the government, given both its own debt laden finances and a public that already thinks Europe costs Britain too much in money and sovereignty.

Speaking to reporters in Brussels later Wednesday, Mr. Osborne said the U.K. government isn't concerned about the exposure of the nation's banks to Ireland, and that would not be its motivation were it to provide financial help.

The U.K. is looking at a range of possible options to help out Ireland, a person familiar with the matter said, and has not ruled out the use of bilateral loans. Still, there are a number of uncertainties that make it hard to say what shape, if any, British aid could come in, including the fact that the Irish have yet to ask for help and it is unclear what help the IMF will provide.

Last night, finance ministers from the euro zone—of which the U.K. isn't a member—agreed that a mission from the commission, the International Monetary Fund and the European Central Bank should visit Ireland to prepare a financial support package for the country and its banks.

The rescue package could be as large as €100 billion ($134.89 billion), but it's as yet unclear how much euro-zone governments want the U.K. to contribute. Unlike Sweden and Poland—which are also outside the currency area—the U.K. hasn't signed up to support the European Financial Stability Facility.

Mr. Rehn said that agreeing on the steps Ireland needs to take to tackle its bank problems is urgent. "We have been engaged in technical talks for some time already and after this meeting the technical talks will be intensified," he said. "It's now essential to establish the real state of the banking situation in Ireland. The situation is certainly very pressing and very, very serious, so we don't have any time to waste."

Irish Finance Minister Brian Lenihan said Wednesday "intensive engagement" will begin on Thursday with EU partners to discuss the best ways to support the Irish banking system, adding that euro-zone finance ministers are determined to take whatever action is needed.

"Intensive engagement will now take place so we can ensure that we can stabilize our banking sector," Mr. Lenihan told state broadcaster RTE Radio. "The discussions will begin on Thursday."

"We will work with our European partners to solve these difficulties and we're determined to do that and we will look at what is the best way to provide any necessary support to address market risks in the banks," Mr. Lenihan said. "Clearly, despite an amount of work done to support the Irish banking sector, dislocation has persisted, market conditions have not normalized ... If action requires to be taken on a Europe-wide basis, it will be taken."

He said such action is "urgent" and "focused," but no deadlines have been set. "We're not on our own, we're part of the euro zone," Mr. Lenihan said, "and the finance ministers of the euro zone are determined to take whatever action is needed to safeguard financial stability throughout the euro area."

"What we've agreed to do is look at the structural problems in Irish banks in light of recent market pressures and assess what needs to be done," Mr. Lenihan said. "The euro zone is determined to protect its own financial system and that's very important."