UPDATE: Ireland will receive a $113 billion bailout from the European Union and International Monetary Fund to save its banks and pay down its deficit.
European leaders announced the deal late Sunday with the hope that it stabilizes Ireland's banks, which lost billions in an inflated real estate market and the global financial crisis. The bailout also is intended to calm global investors' fears that the eurozone's common currency could be at risk.
Ireland became the second eurozone country after Greece to be rescued. It will immediately use a large chunk of the money help the financial positions of its banks, but more is available for the banks and the government, if needed.
Ireland needs a sizable bailout from the European Union and International Money Fund to keep its financial system from going bust.
The country, dubbed the Celtic Tiger and considered the economic poster child of Europe just a few years ago, has applied for a multi-billion dollar loan package from the European Central Bank and IMF. Irish banks lost billions in an inflated real estate market and the global financial crisis.
"We had a mighty party," said Father Iggy O'Donovan, a parish priest in Drogheda, Ireland, just north of Dublin. "We have the mother of all hangovers now."
European Union finance ministers agreed to the Irish bailout on Sunday, saying it was necessary to ensure the stability of the euro. Considering that 16 European countries' economies are connected under a common currency, insolvency of one country could seriously impact the entire European economy.
Some economists say if the euro weakens considerably, it could even hurt global recovery efforts.
"It could complete destabilize that return to growth that we're beginning to see," said Dominic Swords, professor of economics at Henley Business School in the United Kingdom.
Ireland had been trying to fight off bankruptcy without outside help, but government leaders now say the nation needs a cash infusion of more than $100 billion to pay down the deficit and stop the banks from hemorrhaging capital. Details on the agreement -- including the fund's terms, conditions and size -- still need to be negotiated.
Ireland's move comes just six months after the EU and IMF organized $150 billion bailout of Greece and set aside a trillion-dollar fund for any other European countries immediately facing possible loan defaults.
"There's a certain level of relief (regarding the bailout), because the arrival of the IMF and the European Central Bank, at least it has given us a degree of certainty," O'Donovan said. "There had been the feeling in recent months that we were totally drifting, leaderless, a great deal of pessimism."
Still, he said, the situation is embarrassing when you compare the size of the Irish economy and the magnitude of Ireland's financial problems.
Ireland's financial mess pushed up borrowing costs for other struggling European countries, including Spain and Portugal, which still may end up needing bailouts of their own.
And despite Ireland's announcement, there's still angst among eurozone investors, many who thought that Greece was Europe's weakest link.
"It [Greece] achieved a bailout, a very big bailout. People thought that was the end of it. And it wasn't," said Steve Barrow, a currency strategist at Standard Bank in London.