DUBLIN - Debt-struck Ireland formally applied for a massive European Union-IMF loan Sunday to stem the flight of capital from its banks, joining Greece in a step unthinkable only a few years ago when Ireland was a booming Celtic Tiger and the economic envy of Europe.
European Union finance ministers quickly agreed to the nearly $140 billion bailout, saying it "is warranted to safeguard financial stability in the EU and euro area." The European Central Bank, which oversees monetary policy for the 16-nation eurozone, welcomed the agreement.
It also confirmed that the International Monetary Fund would contribute financing. Sweden and Britain, not members of the euro currency, said they were willing to provide bilateral loans to Ireland, too.
Irish Finance Minister Brian Lenihan spent much of the night talking to other eurozone financial chiefs about the complex terms and conditions of the emergency aid package.
Lenihan said Ireland needed funds for a "contingency" credit line for its state-backed banks, which are losing deposits and struggling to borrow funds on open markets.
He said the funds would "not necessarily" be used. He emphasized that the government's own operations are fully funded through mid-2011.
Ireland has been brought to the brink of bankruptcy by its fateful 2008 decision to insure its banks against all losses - a bill that is swelling beyond $69 billion and driving Ireland's deficit into uncharted territory.
Ireland's move comes just six months after the EU and IMF organized a $150 billion bailout of Greece.
Ireland's precipitous fall has been tied to the fate of its banks, which received access to mountains of cheap money once Ireland joined the eurozone in 1999. The Dublin banks bet the bulk of its borrowed funds on rampant property markets in Ireland, Britain and the United States, a strategy that paid rich dividends until 2008, when investors began to see the Irish banking system as a house of cards.