Fianna Fail have Bankrupted our Country -

Ireland's economy was teetering on the brink of a European Union bailout last night amid concerns over its soaring national debt.


Shares in the British nationalised Royal Bank of Scotland crashed by five per cent as fears mounted that its group exposure to the crisis-hit nation will drag it deeper into the red.

The Edinburgh-based giant, enmeshed in the stricken economy through its Ulster Bank subsidiary, is facing further losses on its £53billion Irish loan book.

In a worrying omen, the Irish government’s cost of borrowing soared to fresh highs on fears that it will be forced into a Greek-style rescue.

Investors are increasingly alarmed over the escalating cost of repairing its crippled banking sector, which is expected to push the Irish budget deficit up to 32 per cent of national output this year.

It has reignited fears that the crisis could soon envelop other debt-crippled euro-zone members such as Spain and Portugal.

A re-run of the spring’s euro-zone debt crisis would deal a huge blow to the UK’s hopes for an exports-led recovery. The EU soaks up 60 per cent of Britain’s exports, with Ireland accounting for seven per cent.

The Irish and British financial systems are also closely intertwined, with both Lloyds Banking Group and RBS boasting sizeable operations in the Republic.

Irish finance minister Brian Lenihan acknowledged the collapse in Irish bond prices was ‘very serious’ and that there was ‘concern throughout the euro zone about that’.

However, he maintained that his plan to slash a further €6billion (£5billion) from the annual budget will return the nation’s finances to a ‘sustainable and credible basis’.

There are fears that Ireland’s fragile coalition government, with its majority of just two seats, will not be able to muster enough support in parliament for the unpopular budget.

Regardless of next month’s vote, economists warn Dublin will be forced to turn to the EU for financial assistance after its cost of borrowing soared to nearly 9 per cent yesterday.

European Commission president Jose Manuel Barroso said last night: ‘What is important to know is that we have all the essential instruments in place in the European Union and euro zone to act if necessary.’

Ireland’s travails stem from the downturn in its property market.

Last month the government warned that its banking crisis could cost taxpayers €50billion (£42.3billion).