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Ireland has accepted an EU and IMF bailout thought to be worth up to £77 billion after emergency telephone conference talks

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Ireland has finally been forced to take an economic bail-out from the European Union in a deal designed to save the euro. After a humiliating week of denying it needed help, the Dublin government succumbed to pressure from other euro zone countries and asked for a “very big” loan.

G7 and euro zone finance ministers including George Osborne, the Chancellor, held emergency telephone conference talks on a combined EU-IMF rescue package of up to £77 billion.

British taxpayers now face paying a bill of up to £7 billion as under a deal signed by the last Labour government, British taxpayers are liable to share in the cost of any EU bail-out. On Monday Irish and euro zone governments will be watching the markets after Greece, which received a £94 billion bailout in April, warned that the EU’s debt crisis was not finished yet.

Portugal has already warned that there is a “high risk” it might need economic help. If investors are unconvinced by the Irish rescue package, the euro could come under pressure while the cost of borrowing for the Dublin government could rise.

Wolfgang Schaeuble, the German finance minister, said that the deal was necessary to preserve the euro’s future. “We are not just defending a member state but our common currency,” he said. “Ireland has to meet strict conditions, and these will be negotiated in the coming days, so that it is not just providing financing but about ensuring that the problems are solved.”

Last week, Herman Van Rompuy, the EU president, warned that debt contagion was a “survival crisis” threatening the existence of the euro and the wider European Union.

Brian Lenihan, the Irish finance minister, refused to be drawn on the exact size of the EU-IMF loan he had requested, saying only that it was “very big” and would be “tens of billions. ”The key issue all the time for the government is to ensure that we do not have a collapse of the banking sector,” he said. Mr Lenihan said that the country was running a deficit of over £16billion which it could not afford to finance at current market rates amid concerns about the solvency of Irish banks. He described the loan as “a standby fund” and said not all of it would necessarily be used.

David Cameron pledged to help Ireland as a close “neighbour and friend” but refused to discuss how much aid Britain would be prepared to contribute, or whether the bulk of it would come via a Anglo-Irish agreement or a wider EU deal. ”Our banking systems are linked, our finances and economies are very linked so of course we stand ready to help but I don’t want to speculate about another country’s financial situation,” said the Prime Minister. ”The fact is that we are interconnected and if help is required Britain stands ready to help. ”

Britain’s contribution to the bailout is expected to be between £3billion and £7billion depending on how it is funded, the extent of EU and euro zone guarantees for the Irish and any bilateral British aid.

Under terms of an agreement signed by Labour in May, Britain must pay into to a £51billion EU financial crisis fund which will form a key part of the bailout, potentially costing Britain billions.

On top of that contribution, Mr Cameron faces a choice of whether to give an extra loan directly to Ireland or to contribute even further to the EU and euro zone bailout.

Other EU countries are pressuring him to pay Britain’s fair share after it emerged last week that British financial institutions have £140 billion of assets tied up in Irish banks.

A Treasury spokesman said: “The UK will be closely involved in discussion on the scale and type of assistance as they develop.”

Douglas Carswell, the Conservative MP for Clacton, said that British involvement in the bailout would anger eurosceptics who had voted Tory for a tougher line on Europe.

”Yet again we see that the people we elected to run the country in May are powerless. All they can do is tell us how unhappy they are about it but they continue to hand out billions to Europe at a time of austerity for the country,” he said.

George Papaconstantinou, the Greek finance minister, warned that the Irish bailout would not be enough to plug the euro zone’s black hole of debt.

”Even if Ireland is helped, it cannot prevent the debt crisis from continuing,” he said “[It] will focus on other countries: Spain, Portugal.”

Ireland’s cabinet held emergency talks on Sunday afternoon to finalise the loan request and to sign off an austerity plan for 2011 to 2015 which had been checked by EU and IMF officials over the weekend.

Negotiations have been tense as the EU and IMF impose tough conditions to force Ireland to cut public expenditure by £13billion and to increase taxation on the vast majority of people. Ireland’s last three budgets have already cut spending by £12billion.

Trade unions are warning of “civil unrest” on scale not seen for decades as leaks of the spending plan reveal that there will be sharp tax rises for the low paid and middle class families in order to increase state revenue.

Eamon Devoy, general secretary of the Technical Engineering and Electrical Union, said: "I think there is going to be huge civil unrest. When the draconian measures being proposed are heaped on top of cuts already implemented, life in Ireland will be unbearable.”

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