(FT) -- Eurozone finance ministers will press Ireland and Portugal to spell out their detailed plans to handle their debt loads amid signs that the two countries are edging towards an international bail-out.
The meeting of eurozone finance ministers in Brussels on Tuesday comes amid signs of increasing fractures within the monetary union over the European Central Bank's efforts to pressure Ireland into taking aid.
Portugal's finance minister said that investors believed Lisbon was increasingly likely to be forced to turn to emergency help because of contagion in the financial markets.
"The risk is high because we are not facing only a national or country problem," said Fernando Teixeira dos Santos, referring to the chances that Lisbon will have to seek emergency support.
"It is the problems of Greece, Portugal and Ireland...This has to do with the eurozone and the stability of the eurozone and that is why contagion in this framework is more likely."
His comments sent the euro lower against the dollar, although the eurozone peripheral bond markets of Portugal, Ireland and Greece held steady. The US dollar was also supported by a sharp rise in Treasury yields that followed the release of better-than-expected retail sales data for October.
At the same time Greece's prime minister, George Papandreou, warned that Germany's insistence on investors sharing the pain in any future mechanism for a eurozone bail-out could damage some economies.
"This could break backs. This could force economies towards bankruptcy," he said on a visit to Paris. Dublin was told by the ECB on Monday that funds from the European Union's new bail-out facility could be used by its government to strengthen its banking system.
Ireland, at the centre of the renewed crisis because of its banking woes, is considered by many investors to be almost certain to need financial support, with Portugal to follow.
The comments by Vítor Constâncio, ECB vice-president, about possible support for Ireland added to the pressure that the ECB is applying behind the scenes for swift action by Dublin.
The euro's monetary guardian fears Ireland is assuming its banks can rely indefinitely on the unlimited liquidity it is pumping into the eurozone financial system.
Countries such as Portugal and Spain, both of which have to borrow from the financial markets before Ireland, have supported the ECB's campaign.
But other countries, with stronger fiscal positions, are complaining about the ECB's tactics and could make an issue of the bank's policy at the eurozone meeting.
According to one official, some countries are expected to argue that the €440B ($598B) rescue fund should only be tapped when a country is in emergency need of funds, not just to settle the financial markets. Dublin has said it is fully funded through the spring.
In an interview, Jyrki Katainen, the Finnish finance minister, said he would propose a measure at the summit that would require countries seeking a bail-out to put up collateral before getting a loan from the European financial stability facility.
Mr Katainen said the measure would help lower borrowing costs and get around the "no bail-out" clause in the EU's treaty. But it would also make it more onerous for countries to tap the fund, a sign Finland is among those who feel the pressure on Ireland is unjustified.
Source: CNN
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