By Jodie Ginsberg and Jan Strupczewski
DUBLIN/BRUSSELS (Reuters) - Ireland requested an international bailout on Sunday to tackle its banking and budget crisis, the euro zone's second bailout this year as Brussels moves to protect Europe's wider financial stability.
"The European authorities have agreed to our request," said Prime Minister Brian Cowen. "I expect that agreement to be finalized shortly, within the next few weeks."
The size of the rescue by the European Union and the International Monetary Fund has yet to be negotiated but is likely to be smaller than Greece's bailout last May.
"I would say we are talking about 80-90 billion euros ($110-123 billion)," a senior EU source said, adding that this sum would include money to support the Irish banking sector.
Economic and Monetary Affairs Commissioner Olli Rehn said experts from European Commission, European Central Bank and IMF would prepare a three-year package of loans by the end of the month.
"Providing assistance to Ireland is warranted to safeguard the financial stability in Europe," Rehn told Reuters.
"The program under preparation will address both the fiscal challenges of the Irish economy and the potential future capital needs of the banking sector in a decisive manner."
The European Central Bank said the aid would be provided under "strong policy conditionality."
EU policymakers have feared that Ireland's problems might spread to other euro zone members with large budget deficits such as Spain and Portugal, threatening a systemic crisis.
In Berlin, German Finance Minister Wolfgang Schaeuble played down the risk that Ireland's crisis might spread to other weaker euro zone members. "If we now find the right answer to the Irish problem, then the chances are great that there will be no contagion effects," he told ZDF television.
Irish banks, brought to the brink of collapse by exposure to a property and construction sector that slumped after the global financial crisis, have grown dependent on ECB funds and suffered an exodus of deposits over the past six months.
In May, the EU and IMF launched a 110 billion euro rescue package, the first of a euro zone country, aimed at pulling Greece back from the brink of bankruptcy. In return, Athens promised harsh austerity measures that brought large numbers of Greeks onto the streets in protest.
Yields on Irish government bonds have shot up during the current crisis, meaning that the state would have to pay prohibitively high interest rates to borrow commercially.
(Additional reporting by Lorraine Turner and Padraic Halpin, Brian Rohan in Berlin; Martin Santa in Bratislava; Writing by David Stamp; Editing by Kevin Liffey)
