LONDON: The President of the European Council, Herman Van Rompuy, has raised the stakes before showdown talks among finance ministers in Brussels overnight, warning the European Union could collapse unless the debt crisis that is gripping the region is resolved.
With Ireland and Portugal both on the brink of a bailout, Mr Van Rompuy warned that there is a serious risk of contagion spreading across the entire continent.
''We're in a survival crisis,'' he said in a speech in Brussels. ''We all have to work together in order to survive with the euro zone, because if we don't survive with the euro zone we will not survive with the European Union.''
Mr Van Rompuy's speech added to the pressure on the Irish government, which was continuing to resist international pressure to accept a bailout yesterday.
Shares fell across Europe as pressure mounted on Ireland to accept an EU or International Monetary Fund bailout to stem contagion to other high-deficit euro zone countries. Portugal, which has seen its borrowing costs rocket along with Ireland's, warned that it too might need a rescue package.
But Ireland's Prime Minister, Brian Cowen, said the country was confident it could cope with its problems and criticised ''inaccurate'' speculation, although he indicated that Ireland may seek international help for its banks to ''reassure'' the markets.
''We are discussing with both the European Central Bank and the IMF and of course the Irish,'' Olli Rehn, the EU's Economic Commissioner said. ''The real problems are in the banking sector, not with the government, but these are connected.''
Ireland fears the punitive terms of a bailout as it would have to give up partial sovereignty over its finances and could be forced to raise corporation tax. The country's opposition finance spokesman, Michael Noonan, said a bailout could lead to Ireland being suspended from the bond markets for three or four years.
The Finance Minister of Portugal, Fernando Teixeira dos Santos, said his country was at risk, as ''we are not facing only a national or country problem - it is the problems of Greece, Portugal and Ireland''.
Many analysts believe a bailout of some sort is inevitable. But EU countries will insist any loans from EU emergency funds to Ireland will only be granted if Dublin signs up to an austerity program on conditions set and enforced by the European Commission and the IMF.
''You can't just throw money from helicopters,'' the German Economy Minister, Rainer Bruederle, said. ''You have to create confidence in institutions, in the state, in public authorities.''
A full EU-IMF bailout would mean Ireland losing key areas of political and economic sovereignty. This would be deeply controversial and could cost the Irish ruling coalition its majority. Senior German political figures suggested that Ireland should increase its corporate tax rates.
British taxpayers could be left with a liability of more than £7 billion ($11.4 billion) from an Irish bailout. But last night the Treasury was yet to be formally approached to agree to any deal.
Guardian News & Media; Telegraph, London