Germany is a reluctant supporter of the EU funds which are being used in the ‘bailout’ of Ireland, and it insists on strict ‘austerity’ conditions, concerned about risk and moral hazard.

However, through its central bank, Germany is lending €325bn (December 2010) to other central banks in the eurosystem. The Central Bank of Ireland (CBI) has borrowed €146bn from the eurosystem in order to support its banks.

This ‘bailout’ of Ireland via the eurosystem is larger than its official EU ‘bailout’ (€146bn as against €67bn) and much cheaper (1% interest as against 5.8%), but it exposes Germany to similar risks.