Britain has offered to make a direct bilateral loan to Ireland as well as contributing to EU and International Monetary Fund (IMF) loans. Government sources say that the government wants "to help a friend in need".
Although final figures for the bail-out will not be agreed for several days, I understand that Britain expects to contribute £7bn or more in total.
The cost of the direct British loan to Ireland is expected to be "in the low billions". The UK will also contribute as a shareholder of the IMF and as a participant in the EU mechanism (as against the eurozone facility) agreed in May by the former Chancellor Alistair Darling.
All the funding will be in the form of contingency loans which the government expects to see paid back.
The chancellor is expected to make a statement in the Commons tomorrow. He is likely to face questions from Eurosceptics like John Redwood about why Britain has agreed to use any European mechanism at all.
Update 2203: John Redwood has just been on the BBC News channel expressing his concern:
"It's not something I'd recommended that we do, and obviously when we hear about it in the House tomorrow I'm sure many of us will want to know why, how much, how long are we out of the money, what are the prospects of being repaid, what is the interest rate? Of course this will be money we have to borrow ourselves, because we don't have any money. All the money we're spending on top of traditional programmes is borrowed."
Source: http://www.bbc.co.uk/blogs/nickrobinson/2010/11/a_friend_in_nee.html
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