Ireland has decided to apply for a bailout loan from Europe and the International Monetary Fund to shore up its struggling finances.

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Irish Finance Minister Brian Lenihan arriving for a European Union finance ministers meeting in Brussels last Wednesday. ((Francois Lenoir/Reuters))

Finance Minister Brian Lenihan broke the news Sunday, saying the bailout would provide "firepower" to back the country's debt-ridden banks.

European Union finance ministers quickly agreed to the 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 and confirmed that the International Monetary Fund would contribute financing.

Sweden and Britain, which are not members of the euro currency, said they were willing to provide bilateral loans to Ireland as well.

Only days ago, Lenihan denied that a bailout package was being negotiated or was even necessary. While he didn't reveal how much money the country would be looking for, Lenihan said it would be less than €100 billion ($139.5 billion Cdn).

Ireland is running a deficit of €19 billion ($26.4 billion Cdn), which Lenihan said could not be financed at current market rates.

He said the country needs help to pay its bills and provide a contingency fund to support banks that are hemorrhaging cash.

Lenihan said the money was a standby fund that would "not necessarily" all be used. He emphasized that the government's own operations are fully funded through mid-2011.

The Sunday Times of London reported the bailout plan would require Ireland to raise taxes and nationalize more banks.

The office of Prime Minister Brian Cowen said the 15-member cabinet would put the finishing touches on the austerity plan Sunday. Cowen's cabinet has been working on the 160-page plan since September.

With files from The Associated Press