As bond yields rise, sources within taoiseach's party admit uncertainty about backbencher support over his handling of crisis
Ireland's opposition parties have stepped up the pressure on the taoiseach, Brian Cowen, with Sinn Féin tabling a motion of no confidence in the wake of his handling of the country's financial crisis.
Caoimhghín O Caoláin, the party's leader in the Dáil, the lower house, urged all TDs, members of the Irish parliament, to vote against Cowen, saying he no longer commanded a majority.
There were also signs that support for the prime minister among his backbenchers is weakening. Party sources told the Guardian that they were not confident that all Fianna Fáil TDs would support him.
As the fallout from the crisis continued, the euro fell further against the dollar and investors continued to demand a higher return for Irish debt.
Yields on Ireland's 10-year government bond rose to 8.43% this morning, up from 7.971% – still down on the 9% levels that sparked panic earlier this month.
Share prices of the two British banks with the biggest exposure to Irish debt fell again in London. Lloyds Banking Group fell 2% to 62p, while Royal Bank of Scotland dipped by 0.6% to 39.6p.
Both companies have fallen sharply since the Irish crisis erupted – RBS has lent £53bn to Irish companies and individuals, while the figure for Lloyds is £27bn.
The political instability in Ireland helped to spark a share sell-off across Europe, with the military clash between North and South Korea adding to nerves in the City. The FTSE 100 fell by 1.2% at one state, and there were similar falls in Spain, Portugal and Ireland, with Dublin's ISEQ index dropping by 1.9%.
City analyst Arturo de Frias, of Evolution Securities, said: 'If the euro is going to be abandoned, then the banking sector has to fall much more. We simply don't believe the euro can be undone without triggering a decade-long recession in Europe.
'But we still don't believe the European governments will let the euro collapse, and hence we reiterate our view that the sector looks extremely cheap, and also very oversold recently.'
The governor of Ireland's central bank, Patrick Honohan, also tried to drum up interest in the Irish troubled banking sector – saying the country's banks were all 'up for sale'.
He said: 'They are up for sale as far as I am concerned. I have been an advocate for a number of years for small countries to have foreign owners for their banks.'
In the Dáil, the focus of some anger in Fianna Fáil turned to the finance minister, Brian Lenihan. Party sources are furious that he told them last week not to worry about the crisis or claims that the International Monetary Fund and the European central bank would have to come to Ireland's rescue.
One senior Fianna Fáil member, who did not want to be named, said the party was not confident that all of its TDs will get behind the government and back the budget in the Dáil.
'If a few Fine Gael or Labour TDs go missing on the day it may pass but there are some in our own party who won't support it,' he said.
Cowen's strategy is to persuade the EU to exert pressure on the main opposition parties to allow the budget to pass.
On his way into the cabinet meeting today, Lenihan reiterated his party's commitment to tough it out: 'We need to pass this budget. We need to publish our plan tomorrow, which we will be doing; the plan has been finalised, the budget will be introduced, and the necessary funding for the budget will be obtained. They are the priorities for this country at present.'
Europe's economic affairs commissioner, Olli Rehn, said the budget should be passed as soon as possible.
He held a confidential briefing with Irish MEPs in Strasbourg who claimed Rehn said the current political and economic crisis was not the time to raise Ireland's controversial low corporation tax rate.
While the commissioner welcomed the publication of the four-year financial plan tomorrow, he made it clear he would prefer a swifter 2011 budget launch date than the planned unveiling on 7 December.
A spokesman for Rehn said: 'Every day that passes brings more uncertainty. But the Irish economy has strong fundamentals, and decisive action should restore robust and sustainable growth, which will safeguard economic and social cohesion.'
Ireland has come under pressure from Britain, Germany and France to move on its low corporation tax rate, the lowest in any major European economy, as a bailout compromise.
Once the four-year plan is presented and the 2011 budget is published, the experts scouring the books in Dublin will be looking for a combination of 'structural reforms' coupled with 'fiscal consolidation' – or budget cuts – as the basis of a recovery programme justifying a bailout accord.
But Rehn's spokesman said: 'There are still no figures for a bailout. I keep seeing firm figures in some newspapers, which is surprising as there are no figures, and I think some papers are going to have to make corrections'.
In Dublin, the Sinn Féin leader said a motion of no confidence in Cowen should be debated as soon as possible. 'He should now put the issue to the test and allow a vote on the motion of no confidence which has been tabled by the four Sinn Féin deputies,' O Caoláin said.
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