The EU and IMF agreed on Sunday to help bail out Ireland with loans to tackle its banking and budget crisis in a bid to protect Europe's financial stability.
Ireland, facing widespread public anger over its handling of the crisis, formally requested the aid on Sunday evening.
"The European authorities have agreed to our request," Prime Minister Brian Cowen said. "I expect that agreement to be finalised shortly, within the next few weeks."
The size of the rescue by the European Union and the IMF has yet to be negotiated but is likely to be smaller than Greece's 110 bln euro bailout last May.
"I would say we are talking about 80-90 bln euros," a senior EU source said, adding that this sum would include money to support the Irish banking sector.
EU Economic and Monetary Affairs Commissioner Olli Rehn said the European Commission, European Central Bank and IMF would prepare a three-year package of loans by the end of the month.
"Providing assistance to Ireland is warranted to safeguard the financial stability in Europe," Rehn told Reuters.
"The programme under preparation will address both the fiscal challenges of the Irish economy and the potential future capital needs of the banking sector in a decisive manner."
Britain, which is not part of the euro zone, said it would offer some 7 bln pounds in bilateral aid.
FEARS OF CONTAGION
EU policymakers have feared that Ireland's problems might spread to other euro zone members with large budget deficits such as Spain and Portugal, threatening a systemic crisis.
In Berlin, German Finance Minister Wolfgang Schaeuble played down this risk. "If we now find the right answer to the Irish problem, then the chances are great that there will be no contagion effects," he told ZDF television.
Portuguese Finance Minister Fernando Teixeira dos Santos said the fact that Ireland would get significant aid "reduces uncertainty and reinforces market confidence".
But some economists were less optimistic.
"I think it means Portugal is next (to request help). I don't know if it will happen before the end of the year or after, but it's almost inevitable now," said Filipe Garcia at Informacao de Mercados Financeiros in Porto.
"I don't know what the markets will say tomorrow," said Pedro Schwartz at San Pablo University in Madrid. "If Portugal is forced to take a bailout then they'll turn their attention to Spain … I think Spain is differentiated but they're not out of the woods. And the euro in general is not out of the woods."
The U.S. Treasury welcomed Ireland's move and said it would "continue working closely with our European counterparts and the IMF to strengthen market stability and the global recovery".
In Toronto, finance ministers from the G7 wealthy nations said Ireland's decision and the action taken by Europe and the IMF would help to "maintain market stability, and safeguard the global recovery".
Ireland's government said a central element of the programme would be "to support further deep restructuring and the restoration of the long-term viability and financial health of the Irish banking system".
Finance Minister Brian Lenihan told a news conference that Irish banks would become significantly smaller than they had been and may look at selling non-core assets.
However, raising Ireland's super-low corporation tax – a bone of contention with higher-rate euro zone partners – was off the agenda, Lenihan said, and was key to future growth.
BANKS ON THE BRINK
Irish banks, brought to the brink of collapse by exposure to a property and construction sector that slumped after the global financial crisis, have grown dependent on ECB funds and suffered an exodus of deposits over the past six months.
Fears about the health of the sector have pushed up Irish borrowing costs, effectively forcing Ireland to seek aid even though the government is fully funded until mid-2011.
"I think it will pacify the markets — but whether it will satisfy them in the long term is another day's work," said Brian Lucey, associate professor of finance at Trinity College Dublin.
The euro rose broadly in Asian trading after news of the planned bailout to trade as high as around $1.3743, up from $1.3683 late in New York on Friday.
The EU and IMF launched their first bailout of a euro zone country, Greece, in May, providing 110 bln euros to it back from the brink of bankruptcy. In return, Athens promised harsh austerity measures that brought large numbers of Greeks onto the streets in protest.
Ireland has already implemented a series of austerity measures over the past two years and said last month it planned further cuts in spending and tax increases to cut 15 bln euros from the budget by 2014.
Irish minister Mary Hanafin told RTE television the four-year fiscal plan had been finalised but had to be cleared by the EU and IMF and would be published on Wednesday.
Local media said it would include a new property tax and cuts to the minimum wage, child benefits and job seekers' allowances. Tax breaks for higher earners may also go.
Unions have warned that further austerity measures could spark unrest in Ireland.
Calls are already growing for the government to stand down and the main opposition party said on Sunday it would consider putting forward a vote of no-confidence in the government, possibly before the December 7 budget.
