DUBLIN, Ireland, Nov. 22 (UPI) -- Ireland faces a political crisis after the country's coalition government agreed to ask for an estimated $120 billion international bailout to rescue its heavily indebted banks.
The Green Party, the junior partner in the Irish coalition, Monday said it would quit the government next month to make way for early elections in January after the "traumatic" events of the past days.
The Irish government Sunday agreed to ask for a European Union and International Monetary Fund-backed package of loans expected to reach more than $120 billion. Irish officials said they didn't need aid as recent as Nov. 15.
The call for aid came after months of EU pressure on Dublin to save its deeply indebted banking system. Brussels fears that the Irish debt crisis spreads to other countries with similar problems, among them Spain, Italy and Portugal. Last spring, Brussels spent some $150 billion to rescue Greece from collapse.
In order to unlock the rescue package, Irish Prime Minister Brian Cowen will likely propose deep budget cuts and tax hikes in the range of $20 billion. That's on top of two years of austerity already endured.
The Irish opposition has reacted angrily to the prospect of more cuts. Protesters broke into Cowen's office Monday and several opposition politicians called for an immediate dissolution of the government and the Parliament.
Credit rating agency Moody's Monday said as it was reviewing Ireland's rating, a "multi-notch downgrade … is now the most likely outcome of our review of the sovereign credit."
Ireland's neighbors lauded the move. Britain will help Ireland with $11 billion in direct aid and through IMF loans, Chancellor of the Exchequer George Osborne said Monday.
"We are not part of the euro and don't want to be part of the euro," Osborne told the BBC. "But Ireland is our very closest economic neighbor so I judged it to be in our national interest to be part of the international efforts to help the Irish."
Ireland has for years resisted to accept that most of its banks, which lent recklessly during a real estate boom in the country, are broke.
Andrew Clare, a professor at the Cass Business School, argues Ireland and all other eurozone countries with indebted banks should face up to reality or risk that the problems remain in the system.
"The only way to put a stop to this sovereign contagion within the heart of the euro is to recognize the losses in the banking sector and then to write off those losses at the expense of bank equity and bondholders," Clare told British daily The Guardian. "It's the investors in bank equity and the holders of bank debt that really need to feel the pain, not the relatively lowly paid workers of the eurozone. Without this type of action these problems will persist."