LONDON - European leaders sought to reassure Ireland's panicky creditors Friday by promising that tougher new terms for future bailouts of indebted countries will not harm them. But nerves remained frayed as some expect the country to follow Greece in grasping for a financial lifeline sooner rather than later.

Speculation about a bailout for Ireland pushed the Dublin government's borrowing costs to record highs this week, the latest indication that the continent-wide crisis over governments with too much debt is still festering and clouding prospects for a hesitant economic recovery.

In a statement that helped calm market fears and lowered Irish bond yields, the finance ministers of Germany, France, Italy, Spain and Britain said the EU's proposed new bailout mechanism "does not apply to any outstanding debt."

That means current lenders to governments would not be liable for extra costs in case of a bailout by Ireland's partners in the 16-country euro currency. Germany has been pushing to share the bailout burden with investors, but has not explicitly said it would seek to impose those changes.

Pressed by volatile markets, EU ministers agreed to be clearer about their intentions and confirmed the new rules would not come into force before mid-2013.

Germany's push to make investors take a "haircut" - or only partial repayment in case of a bailout - led to a bond selloff recently, as investors feared additional losses. That had the effect of cranking up yields on Irish bonds - and potentially increasing borrowing costs the already-strapped country would have to pay when it goes back into the bond market for new borrowing.

The EU ministers' statement took the edge off tensions in bond markets, pushing the Irish 10-year bond yields to 8.13 percent from 8.87 percent on the open and Thursday's record high of 8.95 percent. Yields rise as bond prices fall, and higher yields signify more investor perception of risk they won't get paid back.

While the statement calmed market jitters, media reports nevertheless surfaced that Ireland was in talks with the EU to receive emergency funding for a eurozone financial backstop program. The government denied it was asking for help.

"There's no application for emergency funding from the EU. We're not in talks with the EU on this issue," said an Irish Department of Finance official Friday on condition of anonymity, according to the ministry's policy.

The central bank, the prime minister's office and EU officials also denied the report.

Traders remained on edge as a concrete decision on the new bailout mechanism and its implications for private investors will not be made before the middle of December at the earliest, when EU leaders meet.

EU finance ministers will gather and discuss the issue next week but the European Commission, which is tasked with creating new rules as part of a permanent mechanism to deal with sovereign bankruptcies, will not have anything concrete to offer yet.

Jim Power, chief economist at Friends First in Dublin, said that even though Ireland has enough cash to last it through the middle of 2011, emergency funding from the EU could become necessary if markets remain volatile.

"Not because Ireland necessarily needs a wheelbarrow of money right this minute, but because Ireland is now a systemic risk to the EU and the euro currency. The EU is not going to allow a member country to go through what Ireland's been going through indefinitely," Power said.

The fear is that investor worries will spread to other indebted countries such as Spain, driving up borrowing costs until the debt load becomes unsustainable.

After saving Greece from bankruptcy in May, the EU set up the European Financial Stability Facility, a $1.03 trillion backstop for any other countries that might need support. But that was meant only as a temporary cash guarantee until the EU agreed firm guidelines on how to deal with sovereign default.

Significantly, anger grew among citizens in less profligate countries - particularly Germany, the region's paymaster - over having to foot the bill for other countries' overspending. The fact that bond investors, whose job it is to risk money in order to make financial gains, were guaranteed against losses caused an uproar that politicians are still trying to calm.

Analysts at Glas Securities in Dublin say that lack of full understanding by investors of the bailout mechanism "has in itself added considerably to the 'fear of the unknown' and consequent rise in Irish yields."

Other heavily indebted countries like Portugal and Spain have likewise seen their borrowing costs jump as investors reassessed the risk involved in holding their debt in light of the potential changes to the bailout rules.

"Market participants will still probably have to accept that the issue will drag on for some time but have this morning received a reassurance that the final outcome is unlikely to be as penal as initially feared," the analysts said in a note to investors.

The sheer size of Ireland's country's banking crisis - its bailout is the world's largest when measured per capita - suggests the government will take a very long time to regain market trust in its finances. Banks were hit with heavy losses from the collapse of the country's real estate bubble.

Things are not helped by the dire outlook for the economy, which the government is pounding with savage austerity cuts to lower its budget deficit. The government's focus is on honoring global investors' claims on otherwise bad loans, saddling public finances and taxpayers with the losses in an effort to retain investors' trust.

Meanwhile, unemployment is high and the property market, which helped inflate the Celtic Tiger's growth bubble, remains in the doldrums and is still claiming victims - Irish media reported Friday that Michael McNamara & Co., one of the country's biggest construction firms, was put into receivership under the weight of some $2 billion in loans it could not service.

Ireland's government has an ambitious plan to slash $8.5 billion from its 2011 deficit in a budget that will go to lawmakers in December. Beyond that, the government hopes to prune $11.5 billion more in coming years to get Ireland's deficit - currently running at a modern European record of 32 percent of GDP - back to the euro zone's limit of 3 percent by 2014.