BRUSSELS (Reuters) -Ireland is in talks to receive emergency funding from the European Union and it is likely the former «Celtic Tiger» will become the second eurozone country after Greece to require a rescue plan, sources said yesterday. Irish borrowing costs have shot to record highs this week on concerns about the country’s ability to get a deficit swollen by bank bailouts under control, as well as worries private bond holders could be forced to shoulder part of the costs of any bailout by taking «haircuts» on their holdings. Government officials in Dublin have denied repeatedly in recent days that they plan to tap EU funds and a Finance Ministry spokesman said after the Reuters story was published that Ireland had made no application for aid. Eurozone sources told Reuters that aid discussions were under way, however, with one official saying it was «very likely» Ireland would get financial assistance from the EU facility set up after Greece was forced to seek aid in May. «Talks are ongoing and European Financial Stability Facility (EFSF) money will be used, there will be no haircuts or restructuring or anything of the kind,» one eurozone source said. A second source confirmed the talks. The spreads between Irish 10-year bond yields and German benchmark bunds have rocketed to highs of nearly 700 basis points over the past two weeks on fears of haircuts but they narrowed to around 580 basis points after the Reuters story. The euro, which has also suffered from currency bloc jitters, came off its highs of the day to trade around $1.37. Pressure on Irish and other peripheral eurozone debt had eased slightly earlier in the day after France, Germany, Italy, Spain and Britain issued a statement at a Group of 20 summit in Seoul that confirmed holders of existing euro debt would not take a hit. But borrowing costs remain sky-high and the pressure on Ireland’s fragile banks may have forced the government to enter aid talks even though it is fully funded until mid-2011 and does not face the same liquidity crisis that confronted Greece earlier in the year. Setback Going to the EU for aid would represent a humiliating setback for a country that posted some of the best growth rates in the 16-nation eurozone in the bloc’s first decade of existence. The global financial crisis, weak regulation of the banking sector and a property bubble fueled by rock-bottom interest rates eventually caught up with Ireland. This year its deficit is projected to total 32 percent of gross domestic product, easily the highest in Europe. Jean-Claude Juncker, the chairman of the Eurogroup forum of eurozone finance ministers, said the EU was following the situation in Ireland very closely but that it was up to Ireland to decide whether to seek support. He said there was no immediate reason to think Ireland would ask for aid. Earlier yesterday, Irish Prime Minister Brian Cowen blamed Germany for aggravating Ireland’s woes by pushing the idea of asset value reductions for private bond holders in a future rescue mechanism that Berlin wants in place by 2013, when the EFSF facility expires. Although Germany has made it clear the new mechanism would only apply to debt issued after that date, the plan spooked investors. «It hasn’t been helpful,» Cowen told the Irish Independent newspaper, referring to Germany’s plan. «The consequence that the market has taken from it is to question the commitment to the repayment of debt.» Germany is expected to finalize its proposals for the new rescue mechanism next week, possibly discussing them with its eurozone partners at a meeting in Brussels on Tuesday, November 16. Irish Finance Minister Brian Lenihan said earlier yesterday the country did not need to ask for EU help because of its substantial cash reserves. «The state is well-funded into June of next year; we have substantial reserves, so this country is not in a situation or position where it is required in any way to apply for the facility,» he said in an interview with RTE television. «Why apply in those circumstances? It doesn’t seem to me to make any sense. It would send a signal to the markets that we are not in a position to manage our affairs ourselves,» he said. Austerity measures adopted in eurozone countries FRANCE France’s Constitutional Council approved President Nicolas Sarkozy’s pension bill on Tuesday, clearing the last hurdle for a reform that will raise the retirement age by two years to stem a huge pension deficit. – The law will raise the retirement age to 62 from 60 by 2018, making people work longer for a full pension. The reform will also raise the eligible age to receive a full pension to 67 from 65. – The budget aims to cut the public deficit to 6 percent of GDP in 2011 from an estimated 7.7 percent in 2010, in the first phase of a plan to trim the shortfall to the EU’s 3 percent ceiling in 2013, and 2 percent in 2014. – Raising the top marginal rate of tax to 41 percent from 40 percent to fund pension reforms. IRELAND The Irish government sidestepped questions last Friday about when it would unveil a four-year austerity plan. – It said on November 4 it would push through spending cuts and tax hikes totaling 6 billion euros in 2011 to get its budget deficit under control by a deadline of 2014. – Finance Minister Brian Lenihan said he expected next year’s adjustment, which will be weighed more on the spending side, would cut the deficit to 9.5 percent of GDP in 2011 and to 3 percent of GDP in 2014. – The budget deficit is set to swell to 32 percent of GDP in 2010 due to the one-off inclusion of a mammoth bill for bailing out Ireland’s banks. Excluding the bank bill, the deficit will be nearly 12 percent of GDP this year. – Fitch cut Ireland’s credit rating last month and consumer morale slumped as the cost of cleaning up its banks hit home, piling pressure on the government to bring forward the 2011 budget, the toughest on record, due on December 7. PORTUGAL Portugal’s parliament on November 3 approved the general guidelines of the budget bill, clearing another hurdle for a fiscal program that aims to sharply cut the deficit. – Portugal has promised to cut this year’s budget deficit to 7.3 percent of GDP from 9.3 percent last year and further reduce it to 4.6 percent in 2011. – Cuts of 5 percent in civil servant wages and increases in taxes in an effort to save 5.1 billion euros next year. – On the revenue side, the measures would add 1.7 billion euros to state coffers, or one percentage point of GDP. They include a raise in value-added tax by 2 percentage points for the highest level to 23 percent from 21 percent. GREECE Prime Minister George Papandreou said this month he was not bluffing about the possibility of calling snap elections and that he needed support for policies meant to bring Greece’s deficit to under 3 percent of GDP by 2014 from over 15 percent in 2009. – Greece unveiled its latest austerity budget on October 4. – The budget targeted a deficit of 7.0 percent of GDP in 2011, from a projected 7.8 percent in 2010, below an initial 8.1 percent target under a baseline IMF-EU scenario.